2019 STATE ENTERPRISE ORO NAVIGACIJA ANNUAL REPORT
ANNUAL REPORT 2019 | 1 GENERAL INFORMATION
• Name of the company - state enterprise Oro Navigacija • Address - Balio Karvelio g. 25, LT-02184 Vilnius, the Republic of LIthuania • Manager - Chief Executive Officer Mindaugas Gustys • Nature of activity - air transport infrastructure enterprise • Field of activity – air transport services (NACE 52.23 service activities characteristic to air transportation) • Legal form - state enterprise • Enterprise code (VAT payer code) - 210060460 (LT100604610)
• Single telephone number +370 706 94 502 • Fax +370 706 94 522 • E-mail [email protected] • Website www.oronavigacija.lt • Social networks linkedin.com/company/oro-navigacija/
Key financial indicators for 2019: • Income - 29 163 EUR’ 000 • Net profit - 3 095 thousand EUR • Equity - 48 099 thousand EUR • Assets - 69 488 thousand EUR
Key performance indicators for 2019: • Total number of flights - 269 178 • Number of overflights - 204 295 • Number of terminal flights - 64 883
Key employee indicators for 2019: • Number of employees - 291 • Average gross monthly salary of an employee - 4 407 EUR
Documents and certificates: • Air navigation service provider certificate • Air traffic controller training organisation certificate • ISO 9001:2015 certificate • ISO 37001:2016 certificate
The added value generated by the enterprise in 2019: • 291 workplaces • Number of operated flights per employee – 1 050 • Social insurance and personal income tax calculated for the employees and employer in 2019 – 6 297 thousand EUR • Other taxes (profit tax, tax for the use of state property by the right of trust) calculated in 2019 – 1 617 thousand EUR
2 | ANNUAL REPORT 2019 CONTENTS
Foreword by chairman of the board ...... 4 Foreword by chief executive officer ...... 5 Major events...... 6 Description of activities ...... 8 ON services ...... 8 Management of the enterprise ...... 10 Governance structure ...... 10 Enterprise structure ...... 12 Board ...... 14 Audit committee ...... 15 Performance ...... 16 Financial performace ...... 22 Income ...... 22 Expenses ...... 24 profit contribution policy ...... 25 Assets...... 25 Capital and liablilities ...... 25 Financial relative indicators ...... 26 Audit ...... 27 Key implemented investment projects ...... 28 Employees and wages ...... 30 Sustainable development initiatives ...... 34 Activity plans and forecasts ...... 36 Enterprise strategy ...... 36 Performance and financial forecasts ...... 37 Annex 1. Independent auditor’s report for the year ended 31 December 2019 ...... 42 Annex 2. Financial statements for the year ended 31 December 2019 ...... 46
ANNUAL REPORT 2019 | 3 FOREWORD BY CHAIRMAN OF THE BOARD
In March the enterprise and manufacturer of aviation equipment Spanish company “Indra” signed a memorandum on cooperation, under which it was agreed to evaluate the possibilities of creation of Centre of Competencies in Vilnius in the future and the fields of activity suitable to further cooperation were defined.
In 2019 public institution Monitoring and Forecasting Agency evaluated the governance of state enterprise Oro Navigacija by A index, which is the best among the large companies which have the legal status of state enterprise. This achievement was attained by consistently enhancing the trust in the strategic projects implemented by the enterprise, focusing mainly on the transparency of the activity and accountability.
In 2019 we acquired more knowledge and experience, established close international connections, and the increasing numbers of flights enabled us to seek the objectives even more persistently. One of these objectives is the aim to become the most competitive airspace manager in the Baltic Sea Region and aviation solution innovator.
Last year we paid a lot of attention to formation of solid teams, thus, in order to achieve higher efficiency of the enterprise and sustainable growth we have ratified new organisational structure. While seeking to ensure better comfort for the employees in 2019 we have completed the construction of new administrative and Area Control Centre building. It is expected that the implementation of the activity of the enterprise at the new building will create all the necessary conditions for successful implementation of Baltic FAB strategy until 2025 and allow the development of the current share of state enterprise Oro Navigacija in the air navigation service market.
I would like to express sincere gratitude to every employee, establisher, members of the Board and Committees for cooperation and commitment. By their efficient and honest work each of them contributed to implementation of the strategic objectives set for us in the letter of expectations of the shareholder as well as creating the value for customers and citizens of the Republic of Lithuania.
I am convinced that the successful latter year as well as the timely strategic changes will enable to survive 2020 despite the rough start of the year. A complicated and stressful year awaits our enterprise just like the whole aviation due to the pandemic and the outcome thereof upon the world economy. I believe that state enterprise Oro Navigacija has already mustered a gene which will allow to focus and find the best solutions, thus, reappearing after the difficult period even stronger.
Chairman of the Board of state enterprise Oro Navigacija
Dangirutis Janušas
4 | ANNUAL REPORT 2019 FOREWORD BY CHIEF EXECUTIVE OFFICER
In 2018 the enterprise undertook significant strategic changes and in 2019 we enjoyed the successful results of these changes, which were contributed to by every single employee of the enterprise. At the beginning of the year state enterprise Oro Navigacija became the first state enterprise with the introduced anti-bribery management system in compliance with ISO 37001 standard which has been officially certified. Consequently, at the end of the year Governance Coordination Centre promoting the application of good management principles recognised state enterprise Oro Navigacija as the best state enterprise in introduction of anti-corruption measures and awarded as the leader of anti-corruption measures.
In the course of the previous year we allotted a lot of attention to enhance the social dialogue within the enterprise, therefore, in May we signed an agreement on implementing and retaining efficient social dialogue with the trade union of the enterprise, Association of Air Traffic Controllers of the Republic of Lithuania, trade union of Palanga Air Traffic Control Centre and Kaunas trade union of air traffic controllers. We have agreed to aspire a common vision on maintaining the balance between the success of the enterprise and fluent mutual cooperation.
In 2019 developed the cooperation with the higher education institutions of the state further. At the beginning of the year we have signed an agreement of cooperation with Engineering Lyceum of Vilnius Gediminas Technical University and agreed to cooperate in organising joint events, excursions, seminars, trainings and other initiatives.
We took active participation in various social initiatives, public events, aspired to strengthen the team spirit of the enterprise, educate the society of the issues related to the activity of state enterprise Oro Navigacija.
In 2019 seeking to become the most competitive airspace manager in the Baltic Sea Region and aviation solution innovator we update the mission, vision, strategic priorities and objectives, also prepared Strategic Performance Plan for 2020–2024, which was ratified by the Ministry of Transport and Communications of the Republic of Lithuania at the beginning of 2020.
Focusing on long-term changes and the successful results thereof, in the future we are planning to pay a lot of attention to the following changes of strategic significance: modernisation and digitalisation of air navigation service systems, increase of activity efficiency and development of new organisational culture.
I would like to thank every employee for the significant contribution and involvement in seeking ambitious objectives of the enterprise and promoting the development and success of the enterprise. I have no doubts that with the current knowledge and competencies we can contribute to the wellbeing of not only the enterprise, but the whole country as well.
Chief Executive Officer of state enterprise Oro Navigacija
Mindaugas Gustys
ANNUAL REPORT 2019 | 5 SIGNIFICANT EVENTS
FEBRUARY 2019 State enterprise Oro Navigacija (hereinafter referred to as ON) and Latvian air navigation service provider LGS as well as the organisations supervising the air navigation services of these countries, namely, public institution Transport Competence Agency (hereinafter referred to as TCA) and Latvian Civil Aviation Agency, signed the agreements in accordance with which their shared the responsibilities responsibility pertaining to the provision of air navigation services on the air route above the neutral waters of the Baltic Sea. This way the long-lasting negotiations between Lithuania and Latvia regarding the provision of air navigation services on this air route were solved. In accordance with the new agreement signed on 6 February 2019 ON shall provide air traffic management, air navigation information as well as search and rescue coordination services at the segment Area Ninta on the air route H64. LGS is responsible for the warning in case of emergency, air traffic control, air traffic flow planning, communication, navigation and surveillance services. Proceeding the cooperation with educational institutions the enterprise signed an agreement of cooperation with Engineering Lyceum of Vilnius Gediminas Technical University. It was agreed to cooperate by organising joint excursions, seminars, trainings and other initiatives. On 22 February TCA issued a certificate on the system suitability for usage applicable to newly installed Aerodrome air traffic surveillance and control system (A-SMGCS).
MARCH 2019
On 12 March the representatives of the enterprise at World ATM Congress, WAC 2019, which took place in Madrid introduced the position of the joint Baltic Functional Airspace Block (hereinafter referred to as Baltic FAB) at the debate on various different topics. On 13 March during the Congress the European Organisation for the Safety of Air Navigation EUROCONTROL and members of iTEC alliance, i.e. air navigation service providers, signed the agreement on cooperation, under which they all undertook the obligation to enhance the interaction between the members of iTEC alliance and EUROCONTROL air traffic management systems as well as fluent data exchange. The purpose of these actions is to ensure constant growth of the flight demand in Europe. ON became the first state enterprise, which introduced anti-corruption management system in accordance with ISO 37001 standard, that was officially certified by the company, which possesses the accreditation for certification of the companies in accordance with the above indicated standard. In 2017-2018 amendments to the legal acts, changes in public procurement and work organisation procedures were carried out at the enterprise in order to introduce anti-corruption management system in accordance with LST ISO 37001:2017 standard “Anti-corruption management systems. Requirements and usage guidelines”. The team of the employees was also supplemented by threat prevention specialists. At the end of August 2018, the indicated system was introduced. ON and Spanish manufacturer of aviation equipment “Indra” signed a memorandum on cooperation, under which they agreed to evaluate the possibilities to established the Centre of Competencies in Vilnius in the future as well as established the fields of activity under which the cooperation shall be implemented.
MAY 2019
The enterprise, trade union of state enterprise Oro Navigacija, Association of Air Traffic Controllers of the Republic of Lithuania, trade union of Palanga air traffic control centre and trade union of Kaunas air traffic control centre signed an agreement regarding implementation and retention of successful social dialogue. The partners are seeking a common vision in order to maintain the balance between the success of the enterprise and fluent mutual cooperation.
JUNE 2019
The site acceptance tests (SAT) of the new iTEC air traffic management system were carried out. On 12 July 2019 after successful system tests manufacturer “Indra” transferred ne air traffic management system iTEC to ON. In 2019 the trainings of the employees were continued, documents were prepared for the certification of the equipment, other system integration and testing works were carried out.
JULY 2019
On 2 July “Indra” completed the installation of new air traffic management (ATM) system and the transfer of the system to Oro Navigacija took place. On 27 July the mobile air traffic control tower was introduced to the society during the international aviation festival “Sakalo sparnai 2019” at the Airbase of Military Airforce in Šiauliai. The tower is unique because it would be used for air traffic control in case it would be impossible to provide air traffic control services from the of the international airports of the Republic of Lithuania.
6 | ANNUAL REPORT 2019 AUGUST 2019
Under the decision of the board no. VL-28 of 1 August 2019 “On Establishing Organisational Structure of State Enterprise Oro Navigacija the new organizational structure of ON was ratified.
SEPTEMBER 2019
The employees of the enterprise moved to the premises of new Area Control Centre and administrative building, the construction of which was completed in July.
OCTOBER 2019
On 10 October AFTN/AMHS system installation contract was signed. On 17 October a contract was signed with ARINC regarding data link services (DLS). On 23-24 October the InterFAB Performance Workshop of European FABs took place in Lithuania for the first time, which was attended by air navigation service providers from seven European countries as well as the representatives of the institutions supervising them. The discussions of the seminar encompassed such challenges as the changing weather conditions, causes of aircraft delays and other relevant topics.
NOVEMBER 2019
On 18 November Transport Competence Agency and Lithuanian Hydrometeorological Service organised a traditional annual meeting with the users of the airspace of the Republic of Lithuania. The previous year was discussed during the meeting, the forthcoming challenges were discussed. On 26 November Governance Coordination Centre, which promotes the application of good governance principles, recognised state enterprise Oro Navigacija as the state enterprise which is best in introduction of anti-corruption measures. The Head of Governance Coordination Centre Vidas Danielius and Deputy Director of Special Investigations Service Egidijus Radzevičius presented Chief Executive Officer Mindaugas Gustys with the award of the leader of anti-corruption measures.
DECEMBER 2019
On 5 December the new additional measures for decrease the noise caused by the aircraft came into force. It was ensured that the turning point for the aircraft taking-off at northern direction would be more distant by 2 km. The turning point which previously was right behind Saulėtekis neighbourhood was transferred behind Nemenčinė road, thus, the residents of the densely populated neighbourhood will experience less inconveniences. 9 December – the end of installation of the voice communication system.
SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD:
The purchase of information system installation, development and maintenance services for flights at the lower air space (up to flight level 95 was announced on 7 January 2020.
On 6 February 2020 the first successful joint session of operation of iTEC and InNOVA systems was carried out. The air traffic management was implemented using the new systems for 3 hours and the new function CPDLS was tested as well.
ANNUAL REPORT 2019 | 7 DESCRIPTION OF ACTIVITIES
ON SERVICES
ON is a certified European air navigation service provider1, which renders air traffic services, communication, navigation and surveillance services, as well as the aeronautical information services at all stages of aircraft operation (see Figure 1). In reference to the nature of its activities, ON is an air transport infrastructure enterprise which forms an integral and inseparable part of the Lithuanian transport sector, an enterprise of strategic importance to the national security. Air transport is one of the transport sectors coordinated by the Ministry of Transport and Communications of the Republic of Lithuania and an inseparable part of a single and integral transport infrastructure in Lithuania.
Taxi & Landing Post Planning Predeparture Climb Cruise Descent Take-off & Taxi flight
Figure 1. Provision of air navigation services at different phases of flight operation
The specifics of air navigation services determine the fact that the Lithuanian air traffic management system is an integral part of the European and global air traffic management system. As a result of the Single European Sky (SES) Concept implemented in the European Union, in 2012, Lithuania and Poland established the Baltic Functional Airspace Block (the Baltic FAB) comprising the airspace of Lithuania and Poland, , on the basis of an intergovernmental agreement, and agreed on the joint organisation of the air navigation services within the Baltic FAB airspace. ON actively develops strategic partnership and international cooperation links: maintains close cooperation with the Polish Air Navigation Service Provider (PANSA) and providers of air traffic services of other functional airspace blocks, air navigation service providers of Belarus (BELAERONAVIGATSIA) and Ukraine (UkSATSE) in order to solve/reduce negative impact of regional challenges and to generate added-value to the airspace users, actively participates in the activities of B4 Consortium2 and technological European iTEC Alliance3 as well as in the regional initiatives4. The representatives of ON are actively participating in the work groups of ICAO European and North Atlantic Regional Office, The European Organisation for the Safety of Air Navigation (EUROCONTROL), the Civil Air Navigation Services Organisation (CANSO) and other international organisations.
PROVISION OF AIR NAVIGATION SERVICES
Search Air navigation Communication, navigation and and rescue information Air traffic management surveillance services coordination services services
Airspace Air traffic flow Communication Navigation Surveillance Air traffic services management management services services services services services
Flight Alert informa- Air traffic information tionservices control services services
Figure 2. Scope of ON activities and services
1Pursuant to the Law on Aviation of the Republic of Lithuania and the certificate issued by the Civil Aviation Administration (the CCA), ON is the only enterprise in the Republic of Lithuania granted the right to provide the air traffic services, communication, navigation and surveillance services, as well as the aeronautical information services to aircrafts operating in the airspace of the Republic of Lithuania. Among air navigation services, ICAO and the EU also include the services of provision of meteorological information to the aviation sector, however, these functions are delegated to other institutions/organizations operating in the Republic of Lithuania. 2B4 Consortium is comprised of four air navigation service providers of Central and Eastern Europe: ON (Lithuania), PANSA (Poland), ANS CR (Czech Republic), and LPS (Slovak Republic). 3European iTEC (Interoperability through European Collaboration) is a project of partnership between air navigation service providers which aims for joint development of air traffic control systems in order to provide the complete interoperability and the added value thereof, by taking advantage of the uniformity of the air traffic control systems being operated. Members of the European iTEC Alliance are major European Air Navigation Service Providers: ENAIRE (Spain), DFS (Germany), NATS (United Kingdom), AVINOR (Norway), LVNL (Netherlands), PANSA (Poland) and the technological partner – manufacturer of the air traffic control systems “Indra”. 4Gate One initiative that unites Central and Eastern European air navigation service providers.
8 | ANNUAL REPORT 2019 The main activity of ON is the provision of air navigation services in the entire airspace of the Republic of Lithuania as well as over territorial waters and the airspace of the Baltic Sea which passes to the Vilnius Flight Information Region5. ON provides air traffic management, communication, navigation and surveillance as well as aeronautical information services and ensures constant operation of Aeronautical Rescue Coordination Centre, organisation and coordination of search and rescue operations in case of aircraft accidents (see Figure 2). In Vilnius Flight Information Region, air traffic services are provided by Area Control Centre (ACC) and Aerodrome Control Centres (AeCC) of Vilnius, Kaunas, Palanga and Šiauliai. The airspace of the Republic of Lithuania above flight level 95 is controlled by the traffic controllers of the Area Control Centre, below flight level 95 – by the traffic controllers of Aerodrome Control Centres of Vilnius, Kaunas, Palanga and Šiauliai. Vilnius Aerodrome Control Centre is responsible for aircrafts arriving to and departing from Vilnius the traffic controllers whereof take over the control of aircrafts from the Area Control Centre when the aircraft is 50 km from the Vilnius Aerodrome Control Centre on average. Kaunas Aerodrome Control Centre is responsible for the aircrafts arriving to and departing from Kaunas, Palanga Air Traffic Control Centre provides air navigation centres in the western part of the airspace of the Republic of Lithuania. Šiauliai Air Traffic Control Centre is responsible for civil and military aircrafts arriving to and departing from Šiauliai. ON also prepares and publishes aeronautical information: Lithuanian Aeronautical Information Publication (AIP) – the main aviation document – publishing the Rules of the Air, Rules of Air Traffic Services and other necessary information. This document is mandatory in preparation for the international or local, commercial or private flights. Aeronautical Information Service Division also prepares and publishes Visual Flights Map of the Vilnius Flight Information Region and Informational Publication of Aerodromes of the Republic of Lithuania (for flights according to visual flight rules) in the Lithuanian and English languages. ON has implemented quality management system which guarantees high-quality, precise and sustainable work of the entire enterprise, ensures the transparency and clarity of all processes taking place in the enterprise, ensures accurate distribution of responsibilities between the employees and promotes constant improvement of the operating processes of the enterprise and ensures the effectiveness of activity. The quality management system of ON complies with the requirements of quality management standard ISO 9001:2015 “Quality management systems. Requirements” which is well-known and recognised on the international scale and is officially certified by the international certification company (see Figure 3).
Figure 3. ON‘s certificates and licences
As the members of B4 Consortium, ON participates in SESAR 2020 Programme6 and performs research/industrial (innovation development) projects as well as contributes to the creation of vision of the future European Air Traffic Management (ATM), new long-term European ATM Master Plan (2019), and development of the newest SESAR technological solutions. ON successfully participates in SESAR 2020 Programme Stage I (2016-2019) and conducts six research/industrial (innovation development) projects: PJ.05 – “Remote Tower for Multiple Airports”, PJ.06 – “Application of FRA for airspace below FL310”, PJ.14 – “Essential ad Efficient CNS Integrated systems”, PJ.19 – “New European Air Traffic Management System Guidance”, PJ.20 –“The European ATM Master Plan Maintenance” and PJ.22 – “Validation and Demonstration Engineering” (see Figure 4). In order to implement anti-corruption management system in ON according to ISO 37001:2016 standard “Anti-bribery management systems. Requirements with guidance for use”, in 2017-2018, ON made certain changes in the area of internal regulations, public procurement and work organisation. In August 2018, the Anti-bribery Management System was implemented. In March 2019, ON became the first state enterprise which implemented anti-bribery management system according to ISO 37001:2016 standard and it was officially certified by a company having the accreditation to certify enterprises according to the aforementioned standard. Certification of ON was performed by the Italian company Certification S.r.l. certified by the national Italian accreditation office Accredia.
Figure 4. Scientific and industrial (innovation development) projects implemented by ON under SESAR 2020 programme Stage I
5Vilnius Flight Information Region is an airspace over the land territory of the country and part of the Baltic Sea (76 126 km2). 6SESAR (Single European Sky ATM Research) 2020 Program is a joint European Sky Air Traffic Management (ATM) research program. This program aims at improving the functionality of European ATM network by modernizing and harmonizing ATM systems, creating, developing, testing and implementing innovative technological and operational ATM solutions.
ANNUAL REPORT 2019 | 9 MANAGEMENT OF THE ENTERPRISE
GOVERNANCE STRUCTURE In reference to the nature of its activities, ON is an air transport infrastructure enterprise which forms an integral and inseparable part of the Lithuanian transport sector, an enterprise of strategic importance to the national security. Air transport is one of the transport sectors coordinated by the Ministry of Transport and Communications of the Republic of Lithuania and an inseparable part of a single and integral transport infrastructure in Lithuania. The air transport sector is significant for successful development of the country, since it creates preconditions for other business subjects of the country to efficiently develop their performance, increases the mobility of the citizens of the Republic of Lithuania and ensures accessibility of Lithuania by air transport. Seeking to achieve its strategic objectives and taking into consideration the nature of its activity as well as strategic significance for national safety, ON coordinates the activity strategy and performance plans of the enterprise with other enterprises from Lithuanian air transport segment (state enterprise Lietuvos Oro Uostai, national supervisory institutions (Lithuanian Transport Safety Administration (LTSA) and public institution Transport Competence Agency (TCA)) and the Military Air Force (MAF) of Lithuanian Armed Forces (LAF) (see Figure 5). Close mutual cooperation of the enterprises of air transport segment, the activity of which is regulated and controlled by the Ministry of Transport and Communications of the Republic of Lithuania ensure consistent development of the air transport segment of the Republic of Lithuania. In order to ensure efficient utilization of the airspace of the Republic of Lithuania and to contribute to ensuring the safety of the Republic of Lithuania, ON maintains active cooperation with Lithuanian Armed Forces on all the matters related to the provision of air navigation services, the purpose of this cooperation is to ensure both the safety of civil airspace users and the efficiency of their
Government of the Republic of Lithuania
Ministry of Transport and Communications of Ministry of National Defence of the the Republic of Lithuania Republic of Lithuania
Lithuanian Public institution Transport Safety Transport Administration Competence Agency
State enterprise State enterprise Military Air Force of Lithuanian Lietuvos Oro Uostai Oro Navigacija Armed Forces
Direct subordination ties Supervisory ties Mutual cooperation ties
Figure 5. Institutions and air transport enterprises subordinate to the Ministry of Transport and Communications of the Republic of Lithuania implementing the national supervision of the civil aviation
10 | ANNUAL REPORT 2019 flights, and also the implementation of the function of national safety. Besides the above-mentioned activity ON cooperates actively with the representatives of Lithuanian Armed Forces when purchasing and installing the equipment used for common objectives, executing joint search and rescue trainings, makes joint preparations for large scale NATO trainings as well as constantly ensures implementation of the mission of air police. The representatives of ON and Lithuanian Armed Forces actively cooperated regarding the planning of automated airspace and utilization thereof for installation of the equipment as well as integration of military and civil drones into the general air traffic within the airspace of the republic of Lithuania. In the Republic of Lithuania, public management of aviation according to the competences is performed by the Government, the Ministry of National Defence, the Ministry of Transport and Communications, the Army Commander, Budgetary Institution Lithuanian Transport Safety Administration and Public Institution Transport Competence Agency. The civil aviation supervision system has been reorganised since 1 January 2019 in order to create a professional, innovative and business-oriented aviation supervision system and to maintain high flight safety indicators in Lithuania. The functions performed by the Civil Aviation Administration (CAA)7 have been delegated to two different authorities operating in the transport sector: Lithuanian Transport Safety Administration (LTSA) and Public Institution Transport Competence Agency (TCA) (see Figure 5). The CAA is reorganised by the way of merger with the LTSA and by delegating this institution to perform part of the functions of public aviation management that have so far been performed by the CAA such as representation of the state in international aviation community, legislation, imposition of administrative sanctions, protection of passenger rights, control of aviation-related noise and financial supervision of air carriers. On the basis of the Law amending the Law on Aviation (18 October 2018 No XIII-1564), the major share of functions performed by the CAA, i.e. civil aviation supervision services (licensing, certification, auditing, etc.) are assigned to the TCA in the subordination of the Minister of Transport and Communications of the Republic of Lithuania the activity whereof in respect of ensuring aviation safety will be actively controlled by the European Aviation Safety Agency (EASA). This control will help to continue to maintain high flight safety indices and a compliance of the services provided with the EU requirements.
Establisher Ministry of Transport and Communications of the Republic of Lithuania
Board Audit Committee
Chief Executive Officer
6 pav. Structure of ON governance and supervision
The management bodies of ON comprise the institution executing the rights and duties of the owner of the enterprise – the Ministry of Transport and Communications of the Republic of Lithuania, the collegial management body – the Board and the sole management body – the Chief Executive Officer. Following the Guidelines of the Organisation for Economic Co-operation and Development (OECD) on Corporate Governance of State-Owned Enterprises and in order to implement good practice of corporate governance, the collegial bodies of all largest enterprises (irrespective of their legal form and established practice) should be reinforced by specialised committees. Guidelines of the OECD on Corporate Governance of State-Owned Enterprises recommend to form Auditing (internal control) Committee, Remuneration (wage and delegation) Committee and other committees (e.g. Risk Control Committee, etc.). Following the Guidelines of the Organisation for Economic Co-operation and Development (OECD) on Corporate Governance of State-Owned Enterprises and in order to implement good practice of corporate governance, in October 2018 the Audit Committee was composed as the advisory body to the Board, the main objective of which is to increase the efficiency of supervision of finance.
7LTSA shall, within its respective competences: 1) implement the public civil aviation development strategy; 2) submit proposals to the Ministry of Transport and Communications in preparation of civil aviation development programs and public aviation safety program; 3) where necessary, in coordination with the Army Commander, set the requirements to the civil aviation for implementation of the Law on Aviation of the Republic of Lithuania; 4) control the implementation of the national civil aviation safety program; 5) issue licenses for performance of air transport; 6) collect safety information and perform the analysis thereof; 7) perform any other functions stipulated by the Law on Aviation and other legal acts of the Republic of Lithuania. TCA shall, within its competences: 1) perform public supervision of civil aviation, including ground facilities and services provided to aviation; 2) organize implementation of the national civil aviation safety programs; 3) perform the functions of respective institution indicated in Regulation (EC) No 300/2008, competent authority stipulated in Regulation (EU) No 1321/2014, Regulation (EU) No 748/2012, Regulation (EU) No 965/2012, Regulation (EU) No 1178/2011, Regulation (EU) No 139/2014, Regulation (EU) No 2015/340, Regulation (EU) No 923/2012, Regulation (EU) No 376/2014 and Regulation (EU) No 2018/395 and national supervision authority stipulated in Regulation (EC) No 549/2004, Regulation (EU) No 390/2013 and Regulation (EU) No 391/2013; 4) issue certificates, approvals and licenses to aviation specialists; 5) provide methodological assistance and consultations on civil aviation matters.
ANNUAL REPORT 2019 | 11 ENTERPRISE MANAGEMENT
REDVITA ČETKAUSKIENĖ Department of Finance and Administration Vilnius University, Master of Economics MINDAUGAS GUSTYS Chief Executive Officer Vilnius University, Banking Study Programme, Master of Economics VAIDOTAS KONDROŠKA Head of Centre of Competencies, Acting Head of Department of Strategic Development and Innovations LINA NUOBARIENĖ Vilnius Gediminas Technical University, Spokesperson Technical Sciences Study Programme, Doctor of Transport Engineering Mykolas Romeris University, Biolaw Study Programme, Master of Law
TOMAS TAMAŠAUSKAS Head of Technical Department DIANA RADŽIŪNIENĖ Vilnius Gediminas Technical University, Telecomunications Engineering Study Head of Internal Auditing Service Programme, Master of Electrical Engineering Vilnius University, International Business Study Programme, Bachelor of Management and Business Administration TOMAS MONTVILA Head of Operational Department Mykolas Romeris University, European Union AGNIEŠKA LIPINSKA Law Study Programme, Master of Law Head of Performance Architecture Division Vilnius Gediminas Technical University, Technical Sciences Study Programme, Doctor of Transport Engineering MARIUS BELIŪNAS Engineeringformatavo Head of Department of Safety and Security Law University of Lithuania, Law and Police Activity Study Programme, Master of Law
Figure 7. Management of ON
In February 2017 Mindaugas Gustys was appointed as the Acting Chief Executive Officer. At the end of 2017 a competition announced by the Ministry of Transport and Communications took place and it was won by Mindaugas Gustys, who was appointed the Chief Executive Officer on 1 December 2017.
12 | ANNUAL REPORT 2019 ENTERPRISE STRUCTURE
Under the decision of the board no. VL-28 of 1 August 2019 “On Establishing Organisational Structure of State Enterprise Oro Navigacija the new organizational structure of ON was ratified (see Figure 8).
Chief Executive Officer
Performance Architecture Internal Auditing Service Division
Spokesperson
Operational Technical Department of Finance and Department of Strategic Development Department of Safety and Security Department Department Administration and Innovations
Air Traffic Control Strategic Development and Air Traffic Management Financial Accounting System Maintenance International Programmes Safety Division Division Division Division Division
Economic Analysis and Project Management and Power and Engineering Area Control Centre Public Procurement Innovation Development Security Division Infrastructure Division Division Division
Communications, Aerodromes Control Human Resources Information Infrastructure Navigation and Centre Management Division Centre of Competence Security Division Surveillance Service
Vilnius Aerodrome Law and Document CNS Vilnius Group Control Centre Management Division
Kaunas Aerodrome Maintenance Division CNS Kaunas Group Control Centre
Palanga Aerodrome CNS Palanga Group Control Centre
Šiauliai Aerodrome Control Centre
Aeronautical Information Service Division
Air Traffic Flow Planning and Data Processing Division
Aeronautical Rescue Coordination Centre
Figure 8. Organisational management structure of ON
Changes in organisational structure as of 1 September 2019: • Performance Architecture Division, under direct subordination to Chief Executive Officer was established; • Vilnius air navigation information centre was eliminated; • The positions of Deputy Chief Executive Officer and Adviser to Chief Executive Officer were eliminated; • Department of Safety, Quality and Security was renamed into Department of Safety and Security; • Safety and Quality Management Division was renamed into Safety Division.
ANNUAL REPORT 2019 | 13 BOARD DANGIRUTIS JANUŠAS Chairman of the Board, Independent Member of the Board 29-01-2018 - 29-01-2022
Current positions in other institutions On 29 January 2018 under the Director of UAB Verslo Konsultacijų Spektras, Certified Advisor of NASDAQ First North Baltic Order of the Minister of Transport Chairman of the Board of AB Toksika Individual consulting practice in business management and Communications a new Board of ON was appointed. On 15 February Work experience Member of the Board of state enterprise Panevėžio Regiono Keliai, UAB Vilniaus Vandenys, 2018 during the meeting of the Board UAB Glass LT Dangirutis Janušas was appointed the Chairman of the Board under the vote of the members of the Board. Three GEDIMINAS ALMANTAS independent members of the Board Independent Member of the Board participated in the Board of ON in 29-01-2018 - 29-01-2022 2019, they comprised 3/5 of members Current positions in other institutions of the Board of ON, also it encompassed Chairman of the Board of UAB EPSO G Chairman of Lithuanian Red Cross Society one representative of the Ministry of Transport and Communications and Work experience General Director and Member of the Board of state enterprise Lietuvos Oro Uostai one representative of the employees of Member of the Board of ACI Europe ON. Members of the Board: Dangirutis Copenhagen Airport, advisor for corporate social responsibility Janušas, Gediminas Almantas, Mikas Jovaišas, Andrius Šniuolis (until 29 MIKAS JOVAIŠAS January 2020) and Vytautas Vaižmužis. Independent Member of the Board The members of the Board have been 29-01-2018 - 29-01-2022 elected for a period of four years. Current positions in other institutions Head of Project Management Division of Activity Architecture and Changes Department of AB Lietuvos Geležinkeliai Since 17-02-2020 the Acting Director of Information Technology Centre LG Digital
Work experience Head of Business Development Department of AB Lietuvos Paštas Head of Strategy and Development Department of AB Lietuvos Paštas
ANDRIUS ŠNIUOLIS Member of the Board, representative of the Ministry of Transport and Communications 29-01-2018 - 29-01-2020 Current positions in other institutions Head of Water and Railway Transport Policy Group of the Ministry of Transport and Communications of the Republic of Lithuania Member of the Board of state enterprise Lietuvos oro uostai
Work experience Director of Water and Railway Transport Policy Department of the Ministry of Transport and Communications of the Republic of Lithuania, Head of Strategic Planning Division of the Ministry of Transport and Communications of the Republic of Lithuania Member of the Board of UAB Detonas, state enterprise Klaipėdos Valstybinio Jūrų Uosto Direkcija, AB Lietuvos Geležinkeliai.
VYTAUTAS VAIŽMUŽIS Member of the Board, representative of the employees 29-01-2018 - 29-01-2022
Current positions in other institutions Head of Aeronautical Rescue Coordination Centre of state enterprise Oro Navigacija
Work experience Head of Aerodrome Air Traffic Control Centre of state enterprise Oro Navigacija Head of Aeronautical Rescue Coordination Centre of state enterprise Oro Navigacija
Figure 9. Board of ON 14 | ANNUAL REPORT 2019 AUDIT COMMITTEE
The goal of the audit committee GEDIMINAS ALMANTAS which was composed in October Chairman of the Audit Committee, Independent Member of the Board 2018 is to enhance the protection 29-01-2018 - 29-01-2022 of the interests of the Board as far Current positions in other institutions as they are related to financial Chairman of the Board of UAB EPSO G Chairman of Lithuanian Red Cross Society accountability. The independent members of the Board are elected by Work experience General Director and Member of the Board of state enterprise Lietuvos Oro Uostai the Board of the enterprise. The third Member of the Board of ACI Europe member, namely, the Chairman of the Copenhagen Airport, advisor for corporate social responsibility Audit Committee is appointed from among the independent members of the Board, but that person cannot JUSTAS KRASUCKIS be the Chairman of the Board. The Independent Member of Audit Committee Audit Committee is composed for 24-10-2018─- 29-01-2022 the period of four years. Under the Current positions in other institutions decision of the Board of ON and Head of Finances of UAB Norameda Independent Member of the Board Member of Audit Committee of state enterprise Klaipėdos Valstybinio Jūrų Uosto Gediminas Almantas is appointed the Direkcija Chairman of Audit Committee, while Work experience Edita Malūkienė and Justas Krasuckis, Director of Fianance of UAB Interlux Head of Finance PLanning and Operations of Trilogy and Crossover for Work who are selected having assessed their Director of Finance of Euromedic International competences and experience, are appointed the Independent Members of Audit Committee. EDITA MALŪKIENĖ Independent Member of Audit Committee 24-10-2018 - 29-01-2022
Current positions in other institutions Director and auditor of accounting and bookeeping company Gaudera
Work experience Chairman and Independent Member of Audit Committee of AB Lifosa Experience in independent financial audit and international project audit at various organisations
Figurre 10. Audit committee of ON
ANNUAL REPORT 2019 | 15 OPERATIONAL PERFORMANCE
In 2019 the number of flights that were provided services by air navigation service providers of Poland (PANSA), Latvia (LGS), Finland (ANS Finland) and Lithuania (ON) within Baltic and North Sea Region8 increased the fastest in comparison to 2018. The most rapid growth of the number of flights that were provided services to was recorded in Polish airspace, it amounted to 4.5 percent. The number of flights that were provided services within the airspace of the Republic of Lithuania grew in a more moderate way, i.e. 1.2 percent and reached 269 178 flights (see Figure 11).
595 874 flights 270 327 flights -0.7 % +1.4 % 731 000 km2 410 000 km2
227 479 flights 771 056 flights -1.3 % -1.6 % 77 400 km2 627 000 km2
296 591 flights 683 152 flights +2.7 % +0.1 % 95 900 km2 158 000 km2
269 178 flights +1.2 % 892 362 flights 76 126 km2 +4.5 % 334 000 km2 Data source: Pan-European ANS Performance data data ANS Performance Pan-European source: Data repository.
Figure 11. Numbers of flights handled by air navigation service providers in Baltic and North Sea Region in 2019, growth or decrease comparing to 2018, the respective airspace size (in km2)
ON is the seventh enterprise in the Baltic and North Sea Region in accordance with the number of the flights that it provides the services to, despite the fact that the airspace controlled by ON is one of the smallest (76 126 km2), if compared to other air navigation service providers operating within the region (see Figure 11). ON is the second enterprise in the Baltic and North Sea Region in accordance with the number of flights provided air navigation services to per one km2 of the controlled airspace. In 2019 the performance of ON was influenced significantly by international environment and factors, related to the activity of certain airlines and air navigation service providers. In comparison to 2018 the total number of flights, which were provided air navigation services within the airspace of the Republic of Lithuania, in 2019 increased by 1.2 percent and amounted to 269 178. This number included overflights9 of 204 295 aircraft (75.9 percent of the total number of flights), which surpasses the results of the same period in 2018 by 2 159 flights or 1.1 percent (see Figure 12). In 2019 the number of terminal flights10 amounted to 64 883 (24.1 percent of the total number of flights), i.e. 1 108 flight or 1.7 percent more than in 2018. 8 1 100% 300 000 269 17 265 91 23.8% 24.0% 24.1%
243 033 80% 250 000 204 295 202 136
200 000 185 167 60%
150 000 40% 76.2% 76% 75.9%
Number of flights Number 100 000 64 883 63 775 57 866 20%
50 000 STATFOR. source: Data
0 0% 2017 2018 2019 2017 2018 2019 All flights Overflights Terminal flights Overflights Terminal flights Figure 12. Number of flights handled by ON to (on the left) and structure of the flow of flights (on the right) in 2017–2019
8Baltic and North Sea Region is composed of eight countries: Lithuania, Latvia, Estonia, Norway, Finland, Sweden, Denmark and Poland. 9Overflights – flights during which the aircraft flew across the airspace of the Republic of Lithuania, but landing/take-off took place at the airports of other countries. 10Terminal flights – the flights during which the aircraft flew across the airspace of the Republic of Lithuania and the landing/take-off was in/from one of the Lithuanian airports.
16 | ANNUAL REPORT 2019 In 2019 the biggest number of flights within the airspace of the Republic of Lithuania was executed by Latvian Air Baltic, Russian Aeroflot and Finnish Finnair airlines. The flights executed by the above mentioned and other seven of the main airlines comprised 57.2 percent of the total number of flights within the airspace of the Republic of Lithuania (see Figure 13).
+10.5% +7.7% -2.6% -4.9% +6.7% +12.1% +4.2% -17.5% +0.5% +11.7%
30 000
25 000
20 000
15 000 27 202 24 619 21 679 2019/2018 10 000 24 077 23 389 23 439 23 707 Variation 22 018 17 991 17 464 17 102 18 542 2019 15 195 14 239
5 000 13 573 13 053 12 106 12 525
11 563 2018 11 717 10 328 10 062 8 299 8 741 6 470 6 435 5 715 5 005 5 957 0 5 335 2017 Air Baltic Aeroflot Finnair Lufthansa Ryanair Rossiya LOT Polish Wizz Air SAS Turkish Airlines Airlines Figure 13. The main airlines executing the flights within the airspace of the Republic of Lithuania in 2017-2019.
In 2019, the most popular overflight destinations, connecting two airports in different countries, were: Paris Charles de Gaulle (CDG) – Moscow Sheremetyevo (SVO), Moscow Sheremetyevo (SVO) – Kaliningrad Khrabrovo (KGD), Kaliningrad Khrabrovo (KGD) – Moscow Sheremetyevo (SVO), St. Petersburg Pulkovo (LED) – Kaliningrad Khrabrovo (KGD), Kaliningrad Khrabrovo (KGD) – St. Petersburg Pulkovo (LED), Moscow Sheremetyevo (SVO) – Frankfurt (FRA) and etc. (see Figure 14).
3 500
3 000
2 500
2 000 3 039 3 088
1 500 3 019 2 202 2 004 1 996 2 421 2 202 2 276 2 163 2 173 2 287 2 089 2 227 1 976 2 407 1 842 1 914 1 906
1 000 2 405 1 761 2 001 1 846 1 836 1 875 1 859 1 867 1 811 1 626 1 545
500
0
Paris CDG - Moscow SVO - Kaliningrad KGD - Sankt Petersburg LED - Kaliningrad KGD - Moscow SVO - Moscow SVO - Helsinki HEL - Shanghai PVG - Moscow SVO - Moscow SVO Kaliningrad KGD Moscow SVO Kaliningrad KGD Sankt Petersburg LED Frankfurt Paris CDG Munich MUC Frankfurt Berlin BER 2017 2018 2019
Figure 14. The most popular destinations of overflights across the airspace of the Republic of Lithuania in 2017-2019.
ANNUAL REPORT 2019 | 17 The most popular destinations of aircraft that flew across the airspace of the Republic of Lithuania in 2019 is depicted in Figure 15. In 2019 the main flight destinations were: Europe – Europe (48.3 percent of all the flights within the airspace of the Republic of Lithuania), Europe – Russia – Europe (28.0 percent), Russia – Russia (from the main territory of the Russian Federation to Kaliningrad Region and vice versa) (7.7 percent), Europe – Southeast Asia - Europe (7.1 percent), Europe – China - Europe (5.8 percent). 1 678 Russia - 36 708 37 895 2 726 Europe - Russia Europe Russia - Europe Russia - Europe South-East Asia - Europe Asia - Europe South-East 128 406 425 Europe - Europe - Europe Europe 1 261 Asia 9 254 9 627 Europe - Europe - Europe Europe Europe - Russia Europe Europe - Europe South-East South-East South-East Asia - Europe Asia - Europe 2 488 20 426 Russia - Europe Russia - Europe Russia - 346 277 6 955 8 464 China Other China Africa Africa China - Europe Europe Europe - Europe Europe - Europe - Europe Source: CRCO of EUROCONTROL data. EUROCONTROL of CRCO Source:
Figure 15. The most popular destinations of flights within the airspace of the Republic of Lithuania in 2019 (on the left) and the most significant changes in the number of flights according to different destinations in 2019 in comparison to 2018 (number of flights) (on the right).
In 2019 the most significant increases in the number of flights within the airspace of the Republic of Lithuania were registered in the following destinations: Russia – Europe (+2 488 flights), Russia – Russia (+1 678 flights), Europe – Russia (+1 261 flights), Europe – Europe (+425 flights), Europe – Africa (+346 flights) (see Figure 15). The most significant decrease in the number of flights within the airspace of the Republic of Lithuania was in the destination South-eastern Asia – Europe (-2 726 flights).
THE FASTEST INCREASE IN NUMBER OF FLIGHTS • The number of flights of Getjet Airlines increased 2 664 flights due to the bancruptcy of Small Planet Airlines registered in the Republic of Lithuania the retreat of which from the market was compensated by Getjet Airlines. A significant increase was also recorded in the number of flights of Air Baltic (+2 583 flights) flights which was determined by the development of the airline activities both abroad and in Lithuania. The airline increased the number of flights from Riga to the airports of Ukraine significantly. • The airlines registerred in the Russian Federation – Aeroflot (+1 689 flights), Rossiya Airlines (+1 467 flights) and Pobeda Airlines (+1 099 flights) increased the number of their flights to the airports of Germany and France. The number of flights from Kaliningrad Region to the Russian Federation also taskasAeroflot increased the number of flights bewteen Vilnius VNO and Moscow SVO airports (+178 flights in each direction). • The increase in the number of flights (+956 flights) of Ryanair was determined by new flight destinations, more frequent flights from Vilnius, Kaunas and Tallinn airports.
THE FASTEST DECREASE IN NUMBER OF FLIGHTS • The bancruptcy of airline “Small PLanet Airlines” registered in the Republic of Lithuania determined a decrease in the number of flights 3 753 flights. • The number of WizzAir flights decreased (-1 763 flights) due to contraction of the activity of the airline and discontinued flights between Kaunas, Palanga and London airports Vilni us and Warsaw airports decreased number of flights between Vilnius and London. • The decrease in the number of flights of airlines Lufthansa (-889 flights) and Singapore Airlines (-844 flights) should be associated with possible changes in the routes of the airlines.
Figure 16. The airlines which determined the most significant changes of the flights within the airspace of the Republic of Lithuania in 2019
18 | ANNUAL REPORT 2019 In 2019 most of the overflights were to and from the Russian Federation (see Figure 17). 47 777 overflights to the Russian Federation took place, the increase in their number reached 3.2 percent, while the overflights from the Russian Federation amounted to 48 670 (+6.0 percent). In 2019 a decrease in the number of flights to/from Germany and Finland was witnessed. The number of overflights to Germany, which amounted to 31 664 flights, decreased by 1.6 percent, while the number of overflights from Germany decreased by 5.9 percent. The number of overflights to and from Finland decreased by 1.1 and 2.8 percent respectively. During the reporting period an increase in the number of flights to and from Latvia was recorded, it amounted to 8.0 and 8.9 percent respectively. The remote China was among the most popular overflight destination/origin countries. There were 8 418 overflights to China across the airspace of the Republic of Lithuania, i.e. the number was higher by 3.3 percent in comparison to 2018. 0
60 000 60 000 0 48 67 47 777 46 295 50 000 50 000 45 91 0 4 40 000 40 000 32 17 31 66 28 863 30 000 30 000 27 151 9 0 8 Number of flights Number 18 079 17 570 15 49 15 329 15 586
20 000 14 90 20 000 14 30 13 792 8 41 8 72 8 150 10 000 10 000 7 72 9 2019 0 0 2018 Russia Germany Finland Latvia China Russia Germany Finland Latvia France
Figure 17. The most popular destination countries for overflights across the airspace of Republic of Lithuania (on the left) and the most popular origin countries for overflights across
The following airlines executed the biggest number of flights within the airspace of the Republic of Lithuania: Latvian Air Baltic, Russian Aeroflot and Finnish Finnair. The segment of overflights is more diversified than that of terminal flights, since the share of the flights of ten airlines which had the highest number of flights comprised 56.2 percent of all overflights (see Figure 17). Most of the terminal flights to/ from the international airports (IA) of the Republic of Lithuania were executed by low-cost airlines: Irish Ryanair, Latvian Air Baltic, which in 2019 continued the development of their business and increased the number of flight destinations to/ from the IA of the Republic of Lithuania. Despite the bankruptcy of Small Planet Airlines registered in the Republic of Lithuania, the retreat of which from the market was compensated by GetJet Airlines, also registered in the Republic of Lithuania, and despite the decrease in the number of flights of Hungarian Wizzair and Danish SAS, the total number of terminal flights continued to grow moderately. In 2019 the share of terminal flights executed by ten main airlines comprised even 69.3 percent of all terminal flights at the IA of the Republic of Lithuania (see Figure 18).
2017 2018 2019 2017 2018 2019
Finnair 21 679 22 094 21 360 Ryanair 9 294 11 350 11 947 Aeroflot 17 069 20 216 21 559 Air Baltic 7 056 7 444 7 694 Air Baltic 14 623 17 175 19 508 Wizz Air 8 182 8 939 6 704 Lufthansa 15 723 16 242 15 356 LOT Polish Airlines 4 366 5 029 5 901 Rossiya 11 713 12 106 13 563 SAS 4 399 4 309 4 182 LOT Polish Airlines 5 962 7 496 7 152 GetJet Airlines 148 270 2 993 Turkish Airlines 4 363 4 425 4 717 Aeroflot 1 473 1 802 2 148 Number of flights Number of Air France 4 868 4 539 4 103 Finnair 1 710 1 983 2 079 Pobeda Airlines 636 2 811 3 908 Lufthansa 1 741 1 749 1 746 Air Chine 3 255 3 417 3 638 Ukraine Intl 1 910 1 519 1 480 Others 85 276 91 615 89 415 Others 20 175 21 859 20 706
Figure 18. The airlines which executed the biggest number of overflights in 2017–2019 (on the left) and the airlines which executed the biggest amount of terminal flights in 2017–2019 (on the right)
ANNUAL REPORT 2019 | 19 In 2019 the total number of terminal flights to/from the international airports (IA) of the Republic of Lithuania (including local flights as well, namely, Vilnius-Vilnius, Kaunas-Kaunas, Palanga-Palanga, Šiauliai-Šiauliai) increased by 10.2 percent: at Vilnius IA – by 0.5 percent, at Kaunas IA – by 4.5 percent, at Palanga IA – by 2.5 percent, at Šiauliai IA – by 11.2 percent. During the reporting period most of the terminal flights (70.3 percent) within the Republic of Lithuania were to/from Vilnius IA (see Figure 19).
Vilnius IA 47 478 70.3% Vilnius IA 47 251 Šiauliai IA 39 318 8.3% Palanga IA 9 871 6.8% Kaunas IA 9 449 Kaunas IA 11 743 14.6%
4 599 Palanga IA 4 489 67 580 4 411 flights 2019
5 632 2018 Šiauliai IA 5 064 4 982 2017
0 10 000 20 000 30 000 40 000 50 000
Figure 19. The number of terminal flights (including local flights) at the international airports of the Republic of Lithuania in 2017-2019 (on the left) and the structure of terminal flight segment by IA in 2019 (on the right)
In the most popular countries for flights to and from Lithuania were the United Kingdom, Latvia, Germany, Poland and Denmark. There were 3 452 flights (+2.6 percent) to the United Kingdom and 3 449 flights (+3.0 percent) from the United Kingdom. The number of flights between Lithuania and Latvia also increased: 3 092 flights (+4.0 percent) to Latvia and 3 064 flights (+3.8 percent) from Latvia. The number of flights between Lithuania and Germany, Poland, Denmark decreased (see Figure 20). 2 4000 9 5 4000 8 2 4 3 45 3 44 4 3 36 1 3 34 3 2 3 2 8 0 3 09 7 3 06 7 2 97 2 95 2 86 2 83 2 81 3000 2 81 2 75
2 73 3000 2 66 2 64 8 1 0 2 2 00 2 01 1 99 1 96 2000 2000
1000 1000
2019 0 0 The United Latvia Germany Poland Denmark The United Latvia Germany Poland Denmark 2018 Kingdom Kingdom
Figure 20. The most popular countries to be reached by overflight across the airspace of the Republic of Lithuania (on the left) and the most popular countries the overflights from which were organised across the airspace of the Republic of Lithuania (on the right)
The flows of emigrants and immigrants increasing in Lithuania every year determined the changes in the directions and numbers of the terminal flights from/to the international airports of the Republic of Lithuania (for instance, flights to/from the United Kingdom, Norway, Ukraine and etc.). The most popular were the flights from/to the international airports of the Republic of Lithuania to/from the most important European centres of connecting flights which are closest geographically: Riga, Warsaw, Tallinn, Helsinki, Copenhagen; as well as to/from the emigration directions chosen by the Lithuanians most frequently: London, Oslo and other cities (see Figure 21).
20 | ANNUAL REPORT 2019 2 500 +14 -113 +207 +53 -86 -87 +114 +13 +31 -9 +76 -23 +16 +2 0
2 000
1 500
1 000 2 006 1 797 Number of flights Number
500 957 1 055 1 113 701 624 597 106 451 356 309 273 183 0 156 Riga RIX Riga RIX Riga RIX Riga Oslo OSL Tallinn TLL Tallinn London LTN London STN Helsinki HEL Moscow SVO Moscow Cologne CGN Cologne Vilnius VNO – Vilnius VNO – Vilnius VNO – Vilnius VNO – Vilnius VNO – Vilnius VNO Kaunas KUN – KUN Kaunas – KUN Kaunas – KUN Kaunas – KUN Kaunas – KUN Kaunas Palanga PLQ – PLQ Palanga – PLQ Palanga – PLQ Palanga – PLQ Palanga – PLQ Palanga Warsaw WAW Warsaw Warsaw WAW Warsaw London LTN CPH London LTN Copenhagen CPH Copenhagen Copenhagen CPH Copenhagen Flight number growth Flight number in 2019 Flight number decrease
Figure 21. The most popular directions of terminal flights from Lithuanian international airports in 2019 and the change in them from 2018
The growth of performance of ON in 2019 should be associated with beneficial international environment and factors linked to the activity and development solutions of certain airlines and air navigation service providers. The growth of the number of flights in the airspace of the Republic of Lithuania in 2019 was the highest within the Baltic and North Sea Region, and it reached 1.2 percent
ANNUAL REPORT 2019 | 21 FINANCIAL PERFORMANCE
INCOME The income from air navigation services is composed of route and terminal charges, which reimburse the incurred expenses, related to the provision of air navigation services. In 2019, if compared to 2018, the income of ON decreased by 3.7 percent, the gross profit and the net profit decreased by 13.4 percent and 28.7 percent respectfully, while the expenses increased by 0.4 percent. The income from the main activity, related to provision of route and terminal air navigation services, comprised 95.0 percent of all the income. In 2019 all the targeted financial indicators were achieved by ON (see Figure 22).
2017 29 293 -27 741 8 977 29 043 1 552 Revenue 29 163 2018 30 285 -28 900 Costs -25 956 -26 068 10 906 4 329 6 051
Thousand EUR Gross profit 9 445 2019 29 163 -26 068 Nt profit 122 9 445 3 095 3 095
Revenue Costs Gross profit Net profit Plan Fact
Figure 22. Changes in income, expense, gross and net profit in 2017-2019 (on the left) and implementation of these financial indicators in 2019 (on the right) The income of ON is comprised of the income from the main activity (income from air navigation services), income from financial activity and other activity. In 2019 the income from air navigation services decreased by 6.2 percent and comprised 95.0 percent of the total sum of income received by ON (see Figure 23). Income from other activity (air navigation information and other income related to aviation activity), which increased by 69.8 percent and comprised 4.4 percent in the overall structure of income (see Figure 23).
Other revenue 4,4% 28 757 29 519 30 000 27 697 Financial revenues 0,7% Main operating revenue 95%
20 000
10 000 Thousand EUR Thousand 29 163 1 272 Thousand EUR 500 36 749 17 194 0 2017 2018 2019
Main operating revenue Other revenue Financial revenues
Figure 23. Changes in the income from main activity, other activity and financial activity in 2017-2019 (on the left) and structure of income in 2019 (on the right)
In 2019 the unit rates for the services provided by ON were the following: route charge – 42.75 EUR (in 2017 – 43.59 EUR), terminal charge – 159.00 EUR (in 2018 – 168.56 EUR) (see Figure 24). Seeking to ensure the compliance of the tariffs with the general procedures for establishing the prices, which are applicable to the air navigation services provided all over the world, all the information is provided to the Ministry of Transport and Communications of the Republic of Lithuania, EUROCONTROL and the European Commission. The tariffs are coordinated with the representatives of airspace users: International Air Transport Association (IATA), International Air Carrier Association (IACA), various organisations of representatives of civil aviation and etc. The unit rates of air navigation service charges are calculated and ratified every year. The unit rates of air navigation service charges are calculated in accordance with European Commission Implementation Regulation (EU) No 2019/317 of 11 February 2019 laying down a performance and charging scheme in the single European sky and repealing
22 | ANNUAL REPORT 2019 The unit rates of air navigation service charges are calculated in accordance with European Commission Implementation Regulation (EU) No 2019/317 of 11 February 2019 laying down a performance and charging scheme in the single European sky and repealing Implementing Regulations (EU) No 390/2013 and (EU) 391/2013. In 2018, unit rates of air navigation service charges were established taking into consideration the Baltic FAB air navigation service performance plan for 2015-2019 provided by the European Commission and forecasts of changes in the services provided by STATFOR subdivision of EUROCONTROL, and were ratified under the decision of extended commission of EUROCONTROL in 2018. In 2019 the main customers of ON were the following airlines: Russian Aeroflot (2 670 thousand EUR), Irish Ryanair (2 614 thousand EUR), Latvian Air Baltic (2 558 thousand EUR) (see Figure 24). The above listed airlines pay both route and terminal charges, since they execute flights to/from the international airports of the Republic of Lithuania. In 2019 the charges paid by ten main customers of ON (airlines) comprised 59.1 percent of the collected charges.
200 2017 2018 2019 181.61 168.56 Aeroflot 2 071 2 512 2 670 159.00 Ryanair 2 074 2 473 2 614 150 Air Baltic 2 054 2 317 2 558 Wizz Air 1 614 1 823 1 438 100
EUR Finnair 1 555 1 671 1 600
Thousand EUR Lufthansa 1 560 1 562 1 447
50 44.42 43.59 42.75 Rossiya 1 180 1 156 1 261 LOT Polish Airlines 929 1 060 1 186 Turkish Airlines THY 865 965 995 0 2017 2018 2019 SAS 760 839 912
Terminal unit rate En route unit rate Others 14 692 15 532 14 827
Figure 24. Terminal and route service unit rates (having deducted administrative charge applied by EUROCONTROL) in 2017-2019 (on the left) and main customers (airlines) in 2017-2019 (on the right) Note: the income by the customers is indicated before adjustment (for more information see Annex 4)
ON income from the main activity is composed of the income for route and terminal air navigation services, i.e. route and terminal charges. In 2019 the income for route air navigation services decreased by 7.2 percent, the income for terminal air navigation services – by 0.9 percent. The biggest share of ON income from the main activity was comprised by income from route air navigation services, which in 2019 constituted 82.2 percent of sales income (see Figure 25). In accordance with the provisions of Articles 25-28 of European Commission Implementation Regulation (EU) No 2019/317 of 11 February 2019 laying down a performance and charging scheme in the single European sky and repealing Implementing Regulations (EU) No 390/2013 and (EU) 391/2013 the surplus sum received for reimbursing the expenses of the main activity within the reporting year are returned to the service users within the next two years.
30 000 100% 17.2%17,2% 16.8% 17.8% 23 818 24 554 25 000 22 776 80%
20 000 60%
15 000 40% 82.8% 83.2% 82.2%
Thousands EUR Thousands 10 000
4 939 4 965 4 921 20% 5 000
0 0% 2017 2018 2019 2017 2018 2019
Revenues from en route services Revenues from en route services Revenues from terminal services Revenues from terminal services Figure 25. Changes in the income from the main activity in 2017-2019 In 2017-2019 the biggest of share of route air navigation services earned by ON came from airlines registered in the Central and North European countries, executing flights between the airports of Poland, Latvia, Finland, the Russian Federation and other European countries. The sum paid for route service charges by ten main airlines in 2017-2019 comprised on average 47.5 percent of the total income for route services (see Figure 25). In 2019 the main customers of terminal air navigation services (airlines) of ON were the companies characterised as low-cost airlines: “Ryanair” (1 247 thousand EUR) and “Wizz Air” (726 thousand EUR), also Latvian airline “Air Baltic” (531 thousand EUR). The sum paid for terminal air navigation services by ten main airlines in 2017-2019 on average amounted to 79.7 percent of the total income for the services of this type (see Figure 26).
ANNUAL REPORT 2019 | 23 2017 2018 2019 2017 2018 2019
Aeroflot 1 897 2 321 2 467 Ryanair 1 103 1 255 1 247 Air Baltic 1 531 1 781 2 027 Wizz Air 966 1 014 726 Finnair 1 440 1 551 1 482 Air Baltic 523 536 531 Lufthansa 1 346 1 368 1 264 LOT Polish Airlines 305 328 389 Ryanair 971 1 218 1 367 Getlet Airlines 0 29 323 Rossiya 1 179 1 156 1 261 SAS 329 210 293 Turkish Airlines 784 840 835 Aeroflot 174 191 203 Wizz Air 649 810 712 Lufthansa 214 194 183 En route revenues, EUR thousand revenues, En route LOT Polish Airlines 623 732 797 EUR thousand revenues, Terminal Turkish Airlines 80 125 161 China Southern 736 636 625 Ukrainian Intl 205 165 150 Others 12 860 13 853 13 456 Others 1 437 1 498 1 009
Figure 26. The main customers of route air navigation services (airlines) (on the left) and customers of terminal air navigation services (airlines) (on the right) in 2017-2019. Note. The incomes by the customer are indicated before the adjustments (for more information see Annex 4)
In 2019 the charges paid for terminal air navigation services by airline “Getjet Airlines” registered in the Republic of Lithuania increased significantly, the increase was associated with bankruptcy of another airline “Small Planet Airlines” registered in the Republic of Lithuania. The distribution of income proves that the segment of route air navigation services is more diversified than the segment of terminal air navigation services, since more airlines use route air navigation services within the airspace of the Republic of Lithuania. EXPENSES In 2019 the expenses of ON increased by 0.4 percent in comparison to 2018 and amounted to 26 068 thousand EUR. The biggest share of expenses was constituted by wages, social insurance and other benefits payed to the employees (including provisions, related to employee benefits and accumulated wage expenses), which constituted 64.0 percent of all the expenses as well as depreciation and amortisation costs, which comprised 13.3 percent (see Figure 27).
20 000 16 671 15 938 15 700
15 000
10 000 Thousands EUR Thousands 3 373 4 249 5 000 3 990 3 215 3 477 2 947 0 0 1 132 2 011 1 164 672 798 2019 1 165 1 164 1 043 621 626 2018 0 2017 Expenses Depreciation Equipment EUROCONTROL Insurance expenses Lithuanian Other expenses pertaining to and amortisation maintenance and membership fee Hydrometeorological wages, social expenses repair expenses CRCO information insurance and provision expenses other benefits for the employees Figure 27. Changes in the groups of main expenses in 2017-2019 In 2019 the expenses related to wages, social insurance and other benefits for the employees (including the provisions, associated with the benefits for employees and the accumulated wage expenses) grew by 4.6 percent due to the changes in organisational structure of ON implemented in 2019 and the increase in the number of employees. The overall decrease of the expenses was significantly influenced by the fact that as of 1 January 2019 the membership fee to EUROCONTROL is paid by the supervision institution of the enterprise, namely, public institution Transport Competence Agency, the expenses related to CRCO information provision to Lithuanian Hydrometeorological Service were not incurred. In total this caused a decrease of ON expenses by 1 785 thousand EUR. The expenses of depreciation and amortisation increased by 8.1 percent and amounted to 3 477 thousand EUR, while the increase of other expenses, that comprised 15.3 percent in the total structure, grew up to 18.3 percent. The expenses associated with the support of equipment decreased due to the revised procedures of organising the maintenance and repair of communication, navigation and surveillance equipment. The transparent and efficient organisation of public procurement procedures also contributed to economising the funds of the enterprise significantly.
24 | ANNUAL REPORT 2019 PROFIT When managing the performance, the enterprise focuses on implementing the social and political goals, thus profitable activity plays the secondary role only. In accordance with Item 5 of Article 15 of Law on State and Municipality Companies of the Republic of Lithuania ON is exempt from the payment of profit contribution to the budget of the state, since the structure of income and expenses of ON is regulated by the legal acts of the European Union. Nevertheless, under the consent of the Board of ON and the institution which is entitled the owner rights and obligations in 2018 the enterprise paid a profit contribution of 500 thousand EUR for the performance in 2017, while in 2019 ON paid a profit contribution of 1 100 thousand EUR for the performance in 2018.
ASSETS On 31 December 2019 the value of the assets possessed by ON amounted to 69 488 thousand EUR, the biggest share (62.0 percent) was comprised of the non-current assets. In 2019 the value of the assets possessed by ON increased by 112 thousand EUR (0.2 percent) in comparison to 2018 (see Figure 28). In 2019 real estate, equipment and devices constituted 96.0 percent of non- current assets of ON. In 2019 the carrying value of real estate, equipment and devices decreased by 4 596 thousand EUR, mostly due to the transfer of buildings and other constructions to other state-controlled enterprises as well as the evaluated depreciation. In 2019 the current assets of ON were comprised of cash and cash equivalents (72.3 percent), customer debts and other receivable sums (20.0 percent), fixed-term contributions (7.7 percent).
50 000 47 146 100% 43 084
40 000 37 956 80% 31.2% 32.0% 38.0%
30 000 26 404 60% 22 230
20 000 17 214 40% Thousands EUR Thousands 68.8% 68.0% 62.0%
10 000 20%
0 0% 2017 2018 2019 2017 2018 2019
Fixed assets Current assets Fixed assets Current assets
Figure 28. Changes in assets in 2017-2019 CAPITAL AND LIABILITIES On 31 December 2019 the capital of the owner of ON comprised 34 672 thousand EUR, the equity comprised 48 099 thousand EUR. The level of financial leverage of ON was especially low during the whole analysed period (the equity comprised 69.2 percent of the total sum of equity and liabilities) (see Figure 29). ON has no financial liabilities to credit institutions. Even though following the classical theory of finance the companies are advised to seek the optimal structure of the capital using the loaned capital as well, since ON has accumulated sufficient liquid assets, the enterprise does not intend to increase the loaned capital in the nearest future.
80 000 Payables and other liabilities 30.8%
60 000 Equity 19 781 21 389 69.2% 9 153
40 000
69 488 Thousands EUR Thousands 46 017 49 595 48 099 Thousands EUR 20 000
0 2017 2018 2019
Payables and other liabilities Equity
Figure 29. The changes in equity and liabilities in 2017-2019 (on the left) and the structure of equity and liabilities in 2019 (on the right)
ANNUAL REPORT 2019 | 25 The income of the forthcoming periods, which are related to investment projects, financed by the EU funds, comprised 38.7 percent of all the payable sums and liability sums during the reporting period. Until 31 December 2019 the sum received by ON from Innovation and Networks Executive Agency (INEA) for the purchase of air traffic management equipment amounted to 6 672 thousand EUR, while the sum for modernisation of air traffic surveillance and control system (A-SMGCS) of Vilnius Aerodrome comprised 1 045 thousand EUR. The sum of other subsidies reached 561 thousand EUR. The liabilities related to employee benefits comprised 13.5 percent of all payable sums and liabilities. In the total structure of payable sums and liabilities the provisions accumulated due to the difference between the income earned by ON from air navigation services and the expenses incurred in order to earn the respectful income comprised 25.0 percent. The remaining part was composed of the trade debts and other current liabilities, lease liabilities and other provisions.
FINANCIAL RELATIVE INDICATORS In accordance with the Resolution of the Government of the Republic of Lithuania No. 12 of 9 January 2019 “On Establishing the Target Profitability Indicators for the State Controlled Enterprises for 2019–2021” an average target return on equity was established for ON for the period of 2019-2021 and it amounts to 3.7 percent. The performance of ON is based on the principle of compensation of the expenses, nevertheless, the increase in the flow of flights and number of route and terminal service units as well as the decrease of expenses enabled to ensure high profitability indicators of ON in 2019 (see Figure 30).
40% 10% 36.9% 34.1% 8.7% 31.2% 8% 30% 6.2% 6.3% 6% 20% 4.5% 14.0% 14.7% 4% 14.0% 3.4% 11.2% 2.8% 10% 2% 5.3% 5.4%
0% 0% 2017 2018 2019 2017 2018 2019
Gross profit margin Operating profit margin Net profit margin Return of assets Return of equity
Figure 30. Profitability indicators for 2017-2019
In accordance with the sign multilateral agreement Lithuania entrusts EUROCONTROL to calculate and collect air navigation charges on its behalf. Every week Central Route Charges Office (CRCO) of the European Organisation for the Safety of Air Navigation (EUROCONTROL) transfers money to the account of ON and provides the information on calculated, submitted, collected and transferred sums. In accordance with the multilateral agreement EUROCONTROL issues the invoices, collects the money for provided services and supervises the debt control, it transfers the money for the provided air navigation services to ON within 60 days from the issue of the invoice. These contractual liabilities determine the turnover of customer debts directly, allow to implement the creditor obligations on time and determine high turnover of the debts to suppliers. Exceptionally high liquidity indicators of ON for 2017-2019 ensured the possibility for ON to perform short-term liabilities, by using the possessed current assets (see Figure 31). Since 2017-2019 ON had no financial debts, the debt and equity ratio was equal to
26 | ANNUAL REPORT 2019 zero. When assessing the capital structure of ON (the ratio of liabilities and equity), it can be seen that the share of liabilities increased during the reporting period: the ration of liability and equity in 2019 amounted to 44.5 percent, while in 2018 the ratio of liabilities and assets amounted to 30.8 percent (see Figure 31).
50%
4 3.83,8 44.5% 40% 39.9%
3 2,4 2.4 30% 28.5% 30.8% 2,2.22
2 20% 19.9% 16.6% Coefficient
1 10% 0,5 0.5 0.40,4 0.40,4
0 0% 20172017 m. 20182018 m. 20192019 m. 2017 2018 2019
BendrasisTotal liquidity likvidums Asset turnover ratio Liability and assets ratio Liability and equity ratio
Figure 31. Indicators of assets turnover and total liquidity also financial leverage in 2017-2019
After summarising financial relative indicators of ON, it can be stated that even having taken into consideration the characteristics of ON performance and the compulsory commercial functions assigned by the state, all financial relative indicators of ON are especially high and exceed the recommended target values of relative financial indicators significantly.
Title 2017 2018 2019 Income, in thousand EUR 29 293 30 285 29 163 Gross profit, in thousand EUR 8 977 10 906 9 445 Performance profit, in thousand EUR 1 521 4 122 3 872 Net profit, in thousand EUR 1 552 4 329 3 095 Equity, in thousand EUR 46 017 49 595 48 099 Assets, in thousand EUR 55 170 69 376 69 488 Total liquidity 3.8 2.2 2.4 Gross profit margin, in percent 31.2 36.9 34.1 Performance margin, in percent 5.3 14.0 14.0 Net margin, in percent 5.4 14.7 11.2 Return on assets, in percent 2.8 6.2 4.5 Return on equity, in percent 3.4 8.7 6.3 Debt and equity ratio, in percent 0 0 0 Liability and assets ratio, in percent 16.6 28.5 30.8 Liability and equity ratio, in percent 19.9 39.9 44.5
Table 1. Key performance and financial indicators in 2017-2019
AUDIT The financial statements of ON are prepared in accordance with International Financial Reporting Standards. The audit of financial statements of ON for 2017-2018 was performed by UAB “Main financial solutions”, the reimbursement for the audit of financial statements for one year amounted to 2 900 EUR (not including VAT). In order to ensure alternation (rotation) of the auditor/audit company, UAB “BDO auditas ir apskaita” was elected as the independent auditor to perform the audit of the financial statements of ON for 2019-2020. The reimbursement for performing the audit of financial statements for 2019 and 2020 will comprise 21 000 EUR and 20 600 EUR (not including VAT) respectfully. The auditor’s conclusion on the financial statements of ON for 2019 and the collection of financial statements are provided as Annexes 1 and 2.
ANNUAL REPORT 2019 | 27 MAJOR INVESTMENT PROJECTS
ON implements investment projects in accordance with the Strategic Performance Plan for 2020–2024, which is consistent with the requirements of the respectful regulations of the European Commission, the tasks of the European ATM Master Plan, SESAR Deployment Manager Programme and the obligations of Lithuania undertaken under Local Single Sky Implementation Plan (LSSIP). By ensuring the required level of flight safety and quality of service provision, ON together with other interested parties (state enterprise “Lietuvos oro uostai”, Transport Competence Agency (TCA), the Lithuanian Air Force (LAF), the Lithuanian Hydrometeorological Service and etc.) implements LSSIP tasks and ongoing European projects, carries out local and regional projects. The tasks are related to modernisation of the equipment of air traffic management centres, update of communication, navigation and surveillance devices as well as update of infrastructure, automated flight data Exchange with the aircraft, also installation of optimised information Exchange infrastructure.
The progress of the implementations of tasks, the implementation of which was commenced before Single European Sky ATM Research (hereinafter referred to as SESAR) is depicted in Figure 32. The Figure also depicts the tasks implemented during the first stage of SESAR (SESAR 1, implemented in 2009-2016), separately singling out the tasks, assigned under the Common Pilot Project (hereinafter referred to as CPP) ratified by the Commission Regulation No 716/2014 also the tasks which were not ascribed to CPP.
Optimised ATM Advanced Air Traffic High Performing Enabling the Aviation Network Services Services Airport Operations Infrastructure 2000 2030
88% Pre-SESAR Phase
2011 2024
54% SESAR 1 (PCP only)
2013 2030
10% SESAR 1 (non-PCP) SESAR 1 (non-PCP) SESAR Pre-SESAR Phase Pre-SESAR ESAR 1 (PCP only) ESAR 1 (non-PCP) SESAR Pre-SESAR Phase Pre-SESAR ESAR 1 (PCP only) ESAR 1 (non-PCP) SESAR Pre-SESAR Phase Pre-SESAR ESAR 1 (PCP only) ESAR ESAR 1 (PCP only) ESAR 1 (non-PCP) SESAR Pre-SESAR Phase Pre-SESAR
93% 51% n/a 74% 64% 75% n/a 91% 49% 30%
Figure 32. Progress of implementation of Local Single Sky Implementation Plan (LSSIP) tasks by ON and other interested parties in 2019 (on the left) and progress of implementation of Local Single Sky Implementation Plan (LSSIP) tasks by ON and other interested parties in accordance with all four ATM fields in 2019 (on the right).
Investment projects implemented/planned by ON are directly related with the technological tasks, indicated under Third Level Document of European ATM Master Plan and SESAR Deployment Manager Programme. The key investment projects implemented/ planned by ON during the period of 2015-2025 are listed in Figure 33 and Table 2, while the investments and sources of funding for 2017-2019 are described in Table 3.
Construction of new administrative Installation of air traffic Installation of remote aerodrome and Area Control Centre building management system air traffic management system
Figure 33. The key investment projects implemented by ON during the period of 2015-2024
28 | ANNUAL REPORT 2019 Project Project Air navigation MAJOR INVESTMENT PROJECTS Title of the project Project description value, in implementation Status service systems EUR duration
Unified, contemporary and centralised Installation of remote aerodrome air aerodrome air traffic management system, 7 100 000 2018-2024 In progress traffic control which allows to provide aerodrome air traffic management services remotely Installation of the system is scheduled together Installation of ATIS/D-ATIS with installation of remote aerodrome air traffic 582 000 2020-2021 Planned management Construction of new of Aerodrome Air Traffic Construction of Aerodrome Air Control Centre (AeCC) and Compete Centre Air traffic service Traffic Control Centre (AeCC) and 1 260 000 2020-2022 Planned next to Area Control Centre and administrative systems and Competence Centre building at B. Karvelio St. 25 procedures Further development of air traffic management iTEC IOP 400 000 2020-2024 Planned system (iTEC) Further development of air traffic management iTEC ESS 320 000 2020-2024 Planned system (iTEC) Further development of air traffic management ARTAS iTEC 200 000 2020-2024 Planned system (iTEC) Further development of air traffic management iTEC/iCAS v3 1 500 000 2020-2025 Planned system (iTEC) Planned update of radio communication Updating radio communication equipment “air-land” in accordance with new 765 000 2019-2020 Planned equipment “air-ground” requirements Communication Improvement of radio communication used systems and Improvement of FIS radio for flight information system (FIS) services, by 120 000 2019-2020 Planned procedures communication constructing remote radio stations in Alytus, Šakiai, Telšiai and Šilutė districts
Installation of AFTN/AMHS system Installation of new AFTN/AMHS system 520 000 2018-2020 In progress
Replacement of Vilnius SVC, ILS/ Replacement of technically and morally 1 706 000 2021 Planned DME KTT 02 and ILS/DME 20 outdated equipment with new
Replacement of Palanga SVC, ILS/ Replacement of technically and morally 901 000 2019–2020 Planned DME KTT 19 outdated equipment with new
Replacement of technically and morally Replacement of Kaunas ILS/DME 26 255 000 2024 Planned outdated equipment with new Replacement of technically and morally Navigation Replacement of Vilnius DVOR/DME 794 000 2022-2023 Planned systems and outdated equipment with new procedures Replacement of technically and morally Replacement of Palanga DME 229 000 2021-2022 Planned outdated equipment with new
Replacement of Vilnius, Kaunas and Replacement of technically and morally 511 000 2021-2022 Planned Palanga finder outdated equipment with new Installation of communication, navigation and Installation of centralised surveillance system, also air traffic management management and control of CNS 200 000 2019-2020 In progress system maintenance and centralised control and SV systems (from Vilnius) model Study and installation of multi- Improvement of surveillance services, booking of 3 000 000 2021-2023 Planned sensor WAM system other surveillance service equipment Replacement of Vilnius PSR/MSSR Equipment replacement with new 3 500 000 2021-2023 Planned Improvement of aircraft detection above the Surveillance Initial 3D radar in Palanga 3 500 000 2024-2025 Planned Baltic Sea and at low heights systems and procedures Improvement of the secondary radar (MSSR) and Adaptation of Kaunas MSSR for adjustment thereof for operation without initial 500 000 2024 Planned operation without PSR surveillance radar (PSR) Purchase of selective subject Improvement of surveillance services, booking of 300 000 2020-2022 Planned surveillance system ADS-B other surveillance service equipment Renewal of aeronautical rescue Updating the equipment of Aeronautical Rescue coordination centre equipment and 195 000 2020 Planned Coordination Centre devices R-ATM/SAR-01/1-I/V-C Development of internal IT systems Installation of interactive lower airspace air Flight organisation at lower airspace of the enterprise traffic management system, encompassing the (up to flight level 95) information 880 000 2019-2023 Planned development of technological solution and legal system environment
Table 2. The key investment projects implemented/planned by ON for 2018-2025
ANNUAL REPORT 2019 | 29 EMPLOYEES AND WAGES
Since ON is seeking to become the most competitive airspace manager in the Baltic Sea Region and innovator of aviation solutions, it is of utmost importance for the enterprise to have ambitious, constantly improving employees, who have sufficient competences. Whereas the employees constitute one of the most important factors ensuring the provision of safe and qualitative air navigation services, ON strives to constantly educate the competencies of the employees, guarantee conditions for the employees to work efficiently and qualitatively, ensuring social guarantees and benevolent atmosphere of mutual understanding, provide incentives and award the initiatives of the employees as well as their responsible attitude towards work. When seeking to create and maintain organisational culture oriented towards a common goal and based on values, it is important to promote the values of the employees complying with these norms of behaviour (see Figure 34).
WE ARE WE WORK AS A TEAM INNOVATIVE We seek to be a team: work and help the We are open to changes colleagues and are not afraid to undergo changes When working, we ourselves consider how it may affect others We create without fear of making a mistake We create a friendly atmosphere We suggest new solutions and accept We are diplomatic and challenges tactful in respect of each other
WE ACT OPENLY AND RESPONSIBLY
We share our achievements, WE DO THE information and mistakes RIGHT THING Knowing our rights we perform our obligations We know why, how and what we are doing We act impartially and honourably If we lack knowledge, we seek to learn We do not avoid making decisions We do more than expected
Figure 34. Norms of behaviour promoting the values of ON
30 | ANNUAL REPORT 2019 In the field of human resource management ON follows the provisions of corporate responsibility policy, human resource management policy, collective bargaining agreement, rules on wages and incentives of employees as well as other documents related to human resource management (see Figure 35).
CORPORATE RESPONSIBILITY POLICY
HUMAN RESOURCE MANAGEMENT POLICY
COLLECTIVE BARGAINING AGREEMENT
Description Description of equal op- Quality Quality Description Rules on of pension portunity im- management management Description of new Safety Stress wages and and pension plementation procedure procedure of fatigue risk employee instructions management incentives of annuity and super- VP-3-01 VP-3-02 management adaptation and rules programme employees insurance vision of its Personnel Education of procedure procedure procedure performance Management Employees procedure
Figure 35. Documents related to human resources management
While implementing the corporate responsibility policy ON seeks to decrease the negative impact of its customers (airlines and other airspace users) upon the environment and society also to participate in solving economic, social and environment problems, contributing to the development of the society and growth of economy this way. Taking into consideration the mission, vision, strategic goals and values, ON implements the corporate responsibility of the enterprise by implementing focused activity in four key fields: human rights, employee rights, environment protection and corruption prevention. When implementing corporate responsibility policy ON seeks socially responsible and sustainably developed performance as well as follows the below described principles of corporate responsibility in the fields of employee rights and human resource management (see Figure 36).
PRINCIPLES OF CORPORATE SOCIAL RESPONSIBILITY IN THE AREA OF LABOUR RIGHTS
To seek that ON and other business To seek the elimination of organisations would uphold the freedom To seek the elimination of all forms discrimination in respect of of associations and the recognition of of compulsory and forced labour employment and occupation the right to efficient collective bargaining
PRINCIPLES OF HUMAN RESOURCES MANAGEMENT POLICY
Equality and Prevention Attention Transparent Motivation Interviews Working Fatigue Employee non-discrim- Health and Stress man- of psy- to new and fair of with and rest manage- training ination of safety agement choactive employees wage employees employees hours ment employees substances
Figure 36. Principles of corporate social responsibility in the area of labour rights and principles of human resources management policy
ANNUAL REPORT 2019 | 31 The increase of competitive advantage of ON is influenced significantly by the knowledge and competences of employees, therefore, it is important to be able to purify the most necessary competencies of employees, to educate and maintain them, to enhance the level of knowledge of employees, to promote constant improvement in the professional field and to seek to become professionals. ON pays a lot of attention to education of competencies of the employees: in 2019 the funds allocated to education of competencies of employees amounted to 399.6 thousand EUR (in 2018 – 256.7 thousand EUR), 61 percent of which were the funds allocated to Operational Department. Competencies of the employees of ON are educated pursuant to the provisions of quality management procedures VP-3-01 “Personnel Management” and VP-3-02 “Education of Employees”. On 31 December 2019 ON had 291 employees, most of them were working at the central office of ON, including Area Control Centre (ACC) and Vilnius Aerodrome Control Centre (AeCC). More than 80 percent of all ON employees have higher education, two employees of ON have doctoral degrees of technology sciences (see Figure 37). From 2017 to 2019 the total number of employees decreased by 5.8 percent (18 employees), nevertheless, the number of more educated employees, who have higher education, was growing annually at ON. The number of students seeking education increased annually at ON, therefore, there are employees at the enterprise who have completed the secondary education only.
300 300 25 20 19 21 30 21 20 27 25 54 34 30
200 200
254 244 252 224 226 234 100 100
0 0 3 3 2 2017 2018 2019 2017 2018 2019
Palanga ACC Employess having a secondary education Kaunas ACC Employees having an upper secondary education ON headquaters, Area Control Center, Vilnis ACC, Šiauliai ACC Employees having a higher education Employess having a doctoral degree
Figure 37. Number of employees and their education in 2017-2019
At the end of 2019 air traffic controllers comprised 29.6 percent of ON employees, most of them (68.6 percent) worked at Area Control Centre and Vilnius Aerodrome Control Centre. 42.3 percent of all employees of ON started working at the enterprise during the last decade. There were 95 women working in ON. The executive officers of ON (managers of the highest and medium rank) comprised 10.3 percent of all the employees, while one third of all executive officers of ON were women (see Figure 38).
8% 13% 18% 14%
21% 22% 34% 19%
>60 >30 50-59 20-29 40-49 10-19 29% 30-39 22% 1-9 20-29 <1
Figure 38. Share (percentage) of employees according to their age (on the left) and work experience at ON (on the right) in 2019
32 | ANNUAL REPORT 2019 Most of the employees of ON work at Operational Department (46.4 percent) and Technical Department (22.7 percent). Most of the employees of ON execute functions related to air traffic control. 25.4 percent of the employees of ON execute administrative functions (see Figure 39).
135 Operational Department 133 Air traffic management
Technical Department 66 74 Administration
Department of Finance and Communications, navigation 37 50 Administration and surveillance services
Department of Safety and Air navigation information 25 16 Security services
Department of Strategic 21 11 Technical personnel Development and Innovations Search and rescue 7 Administration 7 coordination serives
Figure 39. Number of employees by departments (on the left) and implemented functions (on the right) in 2019
In 2019 the total fund of employee wages amounted to 14 385 thousand EUR (in 2018 – 14 037 thousand EUR), the average monthly wage per employee – 4 407 EUR (in 2018 – 4 254 EUR). In 2019 the increased number of employees determined the growth of total fund of employee wages by 2.5 percent. The average monthly wage per employee increased by 3.6 percent. Since air navigation services are provided uninterruptedly on 24/7 mode and 53.6 percent of ON employees work shifts (at night, on holidays and festive days), the average monthly wage per employee of ON was significantly higher than the average monthly wage of the country.
ANNUAL REPORT 2019 | 33 SUSTAINABLE DEVELOPMENT INITIATIVES
Corporate responsibility policy of the enterprise establishes the goals and fields of application of corporate responsibility, the applicable principles of corporate responsibility and provisions thereof in different fields of corporate responsibility as well as assessment of the efficiency of executed initiatives. Implementing the corporate responsibility policy, ON seeks to decrease the negative impact of its customers (airlines and other airspace users) upon the environment and society also to participate in solving economic, social and environmental problems, this way contributing to the evolution of the society and growth of economics. By consistently implementing the provisions of corporate responsibility policy, ON contributes to the creation of the wellbeing of general society. Taking into consideration the mission, vision, strategic goals and values, ON implements the corporate responsibility of the enterprise executing focused work in four key fields: human rights, employee rights, environment protection and corruption prevention. When preparing the corporate responsibility policy, the most advanced international and national practice was applied and the United Nations Global Compact was used in the fields of human rights, employee rights, environment protection and corruption prevention. When implementing the corporate responsibility policy ON seeks to execute socially responsible and sustainably developed activity as well as follows the below described principles (see Figure 40).
FIELDS OF CORPORATE RESPONSIBILITY
HUMAN RIGHTS EMPLOYEE RIGHTS
PRINCIPLE 1 PRINCIPLE 3 To seek that ON and other business organisations To seek that ON and other business would support and respect the international human organisations would uphold the freedom of rights in the field of its activity. associations and recognise the right to efficient PRINCIPLE 2 collective bargaining. To ensure that ON is not complicit in abuses of human PRINCIPLE 4 rights. To seek the elimination of all forms of forced and compulsory work PRINCIPLE 5 ENVIRONMENT PROTECTION To seek the elimination of discrimination in respect of employment and occupation. PRINCIPLE 6 To seek that ON and other business organisations would support preventive programmes, ensuring environment protection.
PRINCIPLE 7 CORRUPTION PREVENTION To undertake initiatives for promoting environmental responsibility. PRINCIPLE 9 PRINCIPLE 8 ON and other business shall perform To encourage the development of environment-friendly anticorruption means and be an example in technologies. promotion of anticorruption culture.
Figure 40. Fields of corporate responsibility and corporate responsibility principles applied by ON
The corporate responsibility policy was prepared following the principles of OECD Guidelines on Corporate Governance of State- Owned Enterprises and United Nations Global Compact in the fields of human rights, employee rights, environment protection and corruption prevention, as well as provisions of the document prepared by the United Nations Role of Governments in Promoting Corporate Responsibility and Private Sector Engagement in Development. Taking into consideration the mission, vision and strategic, strategic goals and values ON implements the corporate responsibility thereof by carrying out focused activity in four main fields: human rights, employee rights, environment protection and corruption prevention. The key initiatives that were implemented or are under implementation of ON in different corporate responsibility fields in 2019 are summarised in Figure 41. More detailed information about the initiatives implemented by ON in various corporate responsibility fields and assessment of the efficiency of initiatives will be provided in ON corporate responsibility report for 2019. This corporate responsibility report will be prepared following the guidelines of Global Reporting Initiative (GRI).
34 | ANNUAL REPORT 2019 HUMAN RIGHTS In September 2019 discussion festival “Būtent” took place in Birštonas seeking to focus more on the protection of human rights and educate the society about the threats of cyberspace to the safety of people, cybercrime prevention measures as well as on other relevant cyber safety matters, where representative of ON gave a presentation and initiated a discussion on relevant issues together with representatives of the Ministry of National Defence and private sector. The audience was able to join the discussion and ask questions as well as express their opinion during the event. Since 2018 a special requirement was included into the public procurement documents so that when carrying out public procurement procedures, the suppliers would support and respect international human right protection within their field of activity, implementing their corporate responsibility (social responsibility or sustainable development) policy.
EMPLOYEE RIGHTS On 1 April 2019 after the negotiation of with representatives of trade unions, the system of wages of the employees was ratified, which etsbalishes the payment of variable wage, depending on personal and enterprise indicators of performance. In October 2019 the variable wage system, depending on personal performance indicators was revoked, having agreed upon that with the representatives of trade unions. In September 2019 representatives of ON (trade unions of state enterprise Oro Navigacija, representatives of air traffic controllers of the Republic of Lithuania and administration of ON) participated at the final meeting for creation of social dialogue tool in air traffic management. The meeting was attended by the representatives of international organisations CANSO, ETF, ATCEUC as well as representatives of ANSPs of various countries. The experience of ensuring social dialogue in different companies was exchanged during the meeting. In November 2019 the results of reimbursement investigation were introduced to the representatives of trade unions, based on which the wages were increased in 2020. In December 2019 a repeated microclimate investigation was carried out in ON, the summarised results of which will be introduced to the employees of the enterprise in 2020.
ENVIRONMENT PROTECTION In 2019 ON moved to new administrative building, which is characterised by many benefits in the context of environment protection: smart light, electricity supply, ventilation, heating and air condition systems were installed in the rooms, conditions were created for sorting the waste. Electric vehicle charging station was installed near the buildin, this way contributing to the insfrastructure of electric vehicles in Lithuania and encouraging the employees to use innovative and ecological vehicles. In February 2019 the representatives of ON and state enterprise Lietuvos Oro Uostai (hereinafter referred to as LTOU) signed a jointly prepared document “Noise reduction plan forVilnius Airport for 2019-2020” (hereinafter referred to as the Plan). The main goal of this Plan is to ensure that even as the number of flights at Vilnius international airport is growing the zone where the noise exceeds the limits would not increase or would even decrease as well as the number of residents falling into that zone. The sources of noise are identified under the Plan as well as groups of noise management measures.
CORRUPTION PREVENTION In 2019 when organising the public procurement procedures the enterprise ensured that the procurement documents would include a requirement for the suppliers to follow the code on ethics of suppliers applicable in public procurement. In March 2019 ON became the first state enterprise, which introduced anti-corruption management system in accordance with ISO 37001 standard, which was officially certified by the certification company, that has the accreditation to certify the companies in accordance with the above mentioned standard. In November 2019 Governance Coordination Centre promoting the application of good governance practices recognised “Oro navigacija” as the best state enterprise in recpect of introduction of anti-corruption measures. Chief Executive Officer of the enterprise Mindaugas Gustys was awarded “Leader of Anti-corruption Measures” award.
Figure 41. The key initiatives implemented by ON in 2019 in various different fields of corporate responsibility.
On the website of the enterprise ON also provides information about the initiatives of the enterprise which were implemented or are under implementation at various fields of corporate responsibility as well as description of corporate responsibility policy. It is possible to get acquainted with the detailed report on corporate responsibility of the enterprise for 2019 on the website of the enterprise, the report can be found under the heading “Reports, collections of financial statements” in the column of the respectful year.
ANNUAL REPORT 2019 | 35 ACTIVITY PLANS AND FORECASTS
ENTERPRISE STRATEGY In December 2019 ON updated its Strategic Performance Plan, mission, vision, strategic priorities and goals as well as prepared Strategic Performance Plan for 2020–2024, which was ratified by the Ministry of Transport and Communications on 15 January 2020. In order to become the most competitive airspace manage in the Baltic Sea region and aviation solution innovator, ON created four strategic priorities and defined six strategic goals. The strategic priorities and goals of ON were defined so that they would comply the provisions of the concept of single European airspace, European airspace architecture study (2019) and European airspace architecture study implementation plan (2019), European air traffic management basic plan (2020), CANSO European 2035 vision (2019), Baltic functional airspace block (FAB) development strategy until 2025. When creating strategic priorities and goals of ON, the expectations of airspace users and the society were taken into consideration as well as the expectations the established of ON regarding the activity priorities of ON, established goals and activity principles. The strategic activity priorities of ON are focused on four priorities of balanced scorecard (BSC): customers and services, internal processes, financial performance and human resources.
MISSION SProvision of safe, good-quality and effective air navigation services
VISION The most competitive airspace manager and aviation solutions innovator in the Baltic Sea Region
Increase of Formation of new STRATEGIC Increase of customer satisfaction performance Value creation organisational PRIORITIES efficiency culture
To strengthen the To decrease the To increase the To improve the To increase the social dialogue negative impact competitiveness safety, quality efficiency of and to retain of airspace users of services by and security activity processes To ensure return of common goal and activity of the STRATEGIC GOALS introducing of provided by introducing equity oriented and enterprise upon innovative digital air navigation innovative digital value based environment and solutions services solutions organisational society culture
Figure 42. Strategic priorities and goals of ON in Strategic Performance Plan for 2020–2024
After defining the long-term strategic priorities of ON and set the strategic goals, the strategic tasks were formulated, which would enable to achieve the set goals. The map of strategic goals and tasks for the period of 2020-2024 is provided in Table 3.
36 | ANNUAL REPORT 2019 STRATEGIC STRATEGIC OBJECTIVES STRATEGIC TASKS BSC SECTION PRIORITIES
To effectively provide air traffic management, aeronautical information, To increase the search and rescue coordination services competitiveness of services by introducing innovative digital solutions To effectively provide communication, navigation and surveillance (CNS) services
Increase of customer To reduce the safety risk caused by air navigation services to aircraft Customers and satisfaction accidents and aviation incidents services
To improve the safety, quality and security of provided air To ensure necessary airspace capacity and quality of provided air navigation services navigation services
To ensure cyber security of data transfer networks and information systems
To apply the principles of corporate management To increase the efficiency Increase of of activity processes by Internal performance introducing innovative digital processes efficiency solutions To increase the efficiency of activity processes and to improve their quality
To contribute to noise reduction at the Lithuanian international airports To decrease the negative together with the partners impact of airspace users and activity of the enterprise upon environment and society To implement environment protection initiatives Financial Value creation results To develop provision of commercial services To develop provision of commercial services To create a long-lasting strategy for development of provided services
To strengthen the social To increase employee engagement dialogue and to retain Formation of new Human organisational common goal oriented and resources culture value based organisational culture To ensure stable social dialogue with social partners and employees
Table 3. Strategic priorities, goals and tasks of ON for the period of 2020–2024
PERFORMANCE AND FINANCIAL FORECASTS STATFOR subdivision of EUROCONTROL provides four different scenarios of air traffic flows within European Union Civil Aviation Conference (ECAC)11 zone for the period of 2020-2040 in accordance with different forecasts12. In accordance with the most likely scenario B (moderate growth of world economy) 16.2 million of flights (53 percent more than in 2017) are forecasted within ECAC zone in 2040 and 0.411 million of flights (71 percent more than in 2017) are forecasted within the airspace of the Republic of Lithuania (see Figure 43). During the period of 2017-2040 the number of flights within ECAC zone will increase on average by 1.9 percent annually, nevertheless, the forecasted growth of number of the flights is significantly slower in comparison to the growth before the worldwide financial crisis in 2008, when the number of flights increased twice (from 5 million of flights in 1988 to 10 million of flights in 2008) during the period of 1988-2008. Long-term flight flow tendencies show that every fifteen years the flow increases twice. During the period of 2003-2018 the growth of flight flow within the airspace of the Republic of Lithuania was even more rapid and their number grew more than three times (from 86 805 thousand of flights in 2003 to 265 911 thousand of flights in 2018). Faster grow of the flight flows is forecasted for the period of 2018-2030, while during the successive period of 2030-2040 the growth of number of flights will slow down. The biggest growth in the number of flights for the period of 2020-2040 is forecasted in the Eastern European countries.
11 European Council in 1955, seeking to harmonise the civil aviation policies and practices amongst the member states of the conference. Currently ECAC zone encompasses 44 member states, including all 28 member states of the EU, 31 out of 32 members of European Union Aviation Safety Agency (EASA) and all 41 members of EUROCONTROL. 12 STATFOR subdivision of EUROCONTROL provides four forecasts of air traffic flows for the period of 2020-2040 in accordance with different scenarios: scenario A: rapid growth of economy in an increasingly global world, successfully using the technologies, seeking to cope with such sustainability challenges as environment protection or limited resources; scenario B: moderate growth of the world economy, having harmonised environment protection, social and economic aspects, in order to solve increasingly relevant issues related to sustainability of the world; scenario C: growing tension among different regions of the world, as the threats related to safety and fuel prices are growing, while the integration of international trade and transport is decreasing; scenario D: the intensifying seclusion of EU economy, the growth of which is based on domestic trade.
ANNUAL REPORT 2019 | 37 20 19.5 600 17.8 519 16.2 16.0 468 15.2 14.9 14.0 14.2 421 13.8 411 13.4 379 379 12.4 374
12.4 400 358 11.9 11.7 350 11.4 342 10.9 323 322 302 291 10 285 276
200 Number of flights, million units flights, Number of Number of flights,thousand units flights,thousand Number of
0 0 2025 2030 2035 2040 2025 2030 2035 2040 Data source: EUROCONTROL European aviation aviation European EUROCONTROL source: Data 1. Flight Annex growth. of in 2040. Challenges 2040. to Forecast Scenario A Scenario B Scenario C Scenario D Scenario A Scenario B Scenario C Scenario D Figure 43. Forecast of the change in the number of flights within ECAC zone (on the left) and within the airspace of the Republic of Lithuania (on the right) for 2025-2040
In October 2019 STATFOR subdivision of EUROCONTROL provided the most update forecasts of the number of medium-haul flights. These forecasts are based on the latest historical air traffic flow statistical data and forecasts of economic development as well as the most update information, related to changes in the air traffic flows and to planned events in the aviation industry. Based on the forecasts of medium-haul flight flows provided by STATFOR subdivision of EUROCONTROL, in accordance with the realistic scenario the number of flights within the airspace of the Republic of Lithuania in 2019-2025 will grow on average by 1.9 percent annually (see Figure 44).
400 380 7 371 360 349 343 339 338 5.9 328 333 325 322 317 307 309 308 307 307 307 306 305 304 300 5
4 3.8 3.4 3.1 3 200 3 2.4 Percent 2 1.9 1.7 1.7 1.5 1.6 1.5 100 1.1 1 1 0.3 0.1 0.2 -0.4 Number of flights, thousand units thousand flights, Number of -0.7 0 2019 2020 2021 2022 2023 2024 2025 -1 2019 2020 2021 2022 2023 2024 2025 Data source: EUROCONTROL Forecast of Annual of Forecast EUROCONTROL source: Data (2019 - 2025) October IFR Flights Number of 2019. Optimistic scanario Realistic scanario Pesimistic scanario Optimistic scanario Realistic scanario Pesimistic scanario Figure 44. The forecast of number of flights within the airspace of the Republic of Lithuania for 2019-2025
Due to the planned development of Lithuanian international airports in 2019-2025 in accordance with the realistic scenario the number of terminal flights within the airspace of the Republic of Lithuania will increase noticeably faster (on average by 2.6 percent annually) than the number of overflights (on average by 2.1 percent annually) (see Figure 45).
304 90
300 298 85 290 83 282 276 275 273 79 270 266 266 76 262 258 74 253 73 251 249 249 249 73 249 248 249 72 245 70 68 68 66 65 65 65 65 64 63 63 63 62 60 200
30 100 Number of flights,thousand units flights,thousand Number of units flights,thousand Number of 0 0 2019 2020 2021 2022 2023 2024 2025 2019 2020 2021 2022 2023 2024 2025 Annual of Forecast EUROCONTROL source: Data (2019 - 2025) October IFR Flights Number of 2019. Optimistic scanario Realistic scanario Pesimistic scanario Optimistic scanario Realistic scanario Pesimistic scanario Figure 45. Forecast of overflights (on the left) and terminal flights (on the right) within the airspace of the Republic of Lithuania for 2019-2025
38 | ANNUAL REPORT 2019 The forecast of route and terminal air navigation service units for 2019-2025 provided by STATFOR subdivision of EUROCONTROL shows that in accordance with the realistic scenario the number of route air navigation service units provided by ON will increase by 1.7 percent on average, the number of terminal air navigation service units – by 2.8 percent annually. During the third reporting period (2020-2024) an average growth of the number of air navigation service unit equal to 2.5 percent is expected as well as average growth of terminal air navigation service units equal to 3.5 percent annually. More rapid increase in the number of air navigation service units is expected in 2019-2024 due to the development of Lithuanian international airports (see Figure 46).
800 50 779 761 740 46.3 718 709 44.7 702 696 690 679 42.7 672 668 661 649 40.8 643 641 641 641 640 40.1 39.6 623 621 619 38.6 40 38.7 37.5
600 35.6 35.7 35.1 34.9 34.5 34.7 34.7 34.2 33.9 33.8 34.0 33.6
30
400
20
200 10 Number of flights,thousand units flights,thousand Number of units flights,thousand Number of
0 0 2019 2020 2021 2022 2023 2024 2025 2019 2020 2021 2022 2023 2024 2025 Annual of Forecast EUROCONTROL source: Data (2019 - 2025) October IFR Flights Number of 2019.
Optimistic scanario Realistic scanario Pesimistic scanario Optimistic scanario Realistic scanario Pesimistic scanario
Figure 46. Forecast of the number of route air navigation service units (on the left) and terminal air navigation service units (on the right) for 2019-2025
Revenue forecast. When planning the air navigation service income and expenses for the period of 2020-2024 it is important to ensure the execution of the economic efficiency indicators (decrease of the average factual annual change of unit expenses for route air navigation service provision), ratified under the European Commission Implementation Regulation (EU) No 2019/317 of 11 February 2019 laying down a performance and charging scheme in the single European sky and repealing Implementing Regulations (EU) No 390/2013 and (EU) 391/2013, therefore it is necessary to take into consideration forecasted changes in inflation and price index for 2020-2024 (see Figure 47).
800 200 702.9 682.2 692.5 173.90 172.97 172.75 659.6 669.5 600 150 144.27 132.54
100 400
50 42.27 42.36 42.76 42.91 200 36.81
Number of flights,thousand units flights,thousand Number of 35.0 36.0 37.8 38.9 39.9 Number of flights,thousand units flights,thousand Number of 0 0 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 Terminal unit rates in nominal terms En route unit rates in nominal terms En route unit rates in nominal terms Terminal unit rates in nominal terms
Figure 47. Forecast of inflation and changes in price index for 2020-2024 (on the left) as well as preliminary nominal terminal and route air navigation service unit tariffs within the airspace of the Republic of Lithuania for 2020-2024 (on the right)
ANNUAL REPORT 2019 | 39 Air navigation service unit tariffs (charge rates) are established in accordance with ICAO, EU and EUROCONTROL documents and are always adjusted with the airspace users under multilateral consultations. The unit tariffs of air navigation service charges are calculated and established every year, in accordance with Articles 22-28 of Chapters V-VI and Annexes VII-IX of the European Commission Implementation Regulation (EU) No 2019/317 of 11 February 2019 laying down a performance and charging scheme in the single European sky and repealing Implementing Regulations (EU) No 390/2013 and (EU) 391/2013. Following the Lithuanian air navigation performance plan project for 2020-2024 submitted to the European Commission on 1 October 2019, the preliminary nominal unit tariffs for terminal and route air navigation services within the airspace of the Republic of Lithuania for 2020-2024 are provided in Figure 4. In accordance with European Commission Implementation Regulation (EU) No 2019/317 of 11 February 2019 laying down a performance and charging scheme in the single European sky and repealing Implementing Regulations (EU) No 390/2013 and (EU) 391/2013, the charges for air navigation services are established so that the received income would reimburse the incurred expenses. The forecast of ON income from air navigation services for 2020-2024 is based on the forecasts of the number of medium-haul flight flows and air navigation service units provided by STATFOR subdivision of EUROCONTROL in February 2019 in accordance with realistic (basic) scenario, while the forecast of income from terminal air navigation services is based on the forecasts of the number of medium-haul flight flows provided by STATFOR subdivision of EUROCONTROL in October 2019. The income from route air navigation services is calculated by multiplying the forecasted number of air navigation service units from route service unit tariff, having assessed adjustments related to excess/insufficient return of income from route air navigation services. The income for terminal air navigation services is calculated the same way. The forecasted increase of the main activity income for air navigation services during 2020-2024 is linked directly with the forecasted growth of flights within the airspace of the Republic of Lithuania and the number of services rendered as well as increased expenses, incurred in order to ensure high level of flight safety, while the flow of flights within the airspace of the Republic of Lithuania is increasing. It is forecasted that in 2020-2024 the income for air navigation services will comprise approximately 97-99 percent, the income from other activity – 1-3 percent, income from financial activity – 0.05 percent of the total income of ON. Costs forecast. The expenses of ON for 2020-2024 were planned, following Lithuanian air navigation performance plan project for 2020-2024 provided to the EC on 1 October 2019. When forecasting the employee expenses of ON for 2020-2024, the forecast is based on the presumptions, that ON will have 300-308 employees during the respectful period and the average monthly wage per employee will increase on average by 3 percent every year (see Figure 48).
300 303 304 308 304 6 000 300 5 442 5 276 5 021 5 112 4 860 94 97 98 100100 100100
4 000 200
67 67 67 68 65 Eur
2 000 100 Number of employees Number of 1313991 13939 139139 140140 131399 AdministravimaAdministration s Communication, Navigation and Surveillance services, technical employees 0 0 Air Traffic Management 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 Figure 48. Forecast of number of employees and average monthly wage per employee (on the left) and number of employees in accordance with their functions13 (on the right) for 2020-2024 In 2018 the structure of expenses of European air navigation service providers and ON was especially similar: employee expenses comprised the biggest part of expenses (more than 60 percent), performance expenses accounted for 15-17 percent, depreciation and amortisation expenses comprised 11-12 percent. It is forecasted that during the period of 2020-2024 the biggest part of expected expenses of ON will be comprised of employee expenses (approximately 60 percent), depreciation and amortisation – approximately 20 percent. Due to constantly increasing imbalance between the Lithuanian and European labour markets, growing mobility of the employees in Europe, rising need to invest into development of competencies of ON employees, the goal to motivate the current employees of ON and attract qualified employees from the labour market, in 2024 the employee expenses of ON shall increase by 10 percent in comparison to 2020. Faster increase of depreciation and amortisation during the period of 2020-2024 will be associated with the completion of several high value investment projects that were executed by ON and the commencement of exploitation of acquired assets (new administrative and area control centre, new air traffic control centre, voice communication system) in 2019-2020.
13The employees related to air navigation information services, search and rescue coordination services are classified as employees executing administration functions.
40 | ANNUAL REPORT 2019 Performance forecast. Even though ON is ascribed to the category of state enterprises, the main objective of which is not to seek profit, but rather to meet the interests of the society and to perform the commercial functions delegated by the state, it is forecasted that during the period of 2020-2024 ON will gain profit and will seek to ensure the equity return established by the establisher (on average 3.7 percent during the period of 2019-2021) (see Figure 49). ON financial status forecast was performed having taken into consideration ON income and expense forecast results, the executed/ planned investment projects and their financing sources.
40 000 80 000 32 818 33 449 32 003 31 425 30 000 29 070 63 520 63 196 62 454 62 170 61 048 20 000 60 000 54 412 52 754 51 424 49 700 48 028 9 115 8 775 8 689 8 677
10 000 7 501 ur 2 607 2 581 2 511 2 123 1 656 0 40 000 2020 2021 2022 2023 2024 -10 000 Thousand EUR Thousand Thousand EUR Thousand 20 000 -20 000 8 878 6 579 6 393 6 335 -30 000 5 835 21 568 22 748 - 23 314 24 042 - 24 334 - - - 0 Sales revenues Sales cost price 2020 2021 2022 2023 2024 Gross profit Net profit after taxes Assets Equity Playables and other liabilities
Figure 49. Forecast of ON performance (on the left) and financial status (on the right) for 2020-2024
Investments and investment sources. During the period of 2020-2024 ON will mostly invest into tangible assets (other equipment, devices, tools and machinery) – approximately 90-98 percent of the total investment sum (see Figure 50). During the period of 2020- 2024 the investments of ON will be financed using own funds.
10 000 10 000 9 396 8 996
8 000 7 927 8 000 7 219 5 976 6 000 5 753 6 000 ur 6 4 702 4 174 7 9 39 4 000 3 792 4 000 3 426 7 92 6 Thousand EUR Thousand Thousand EUR Thousand
Nematerialusis 2 5 97
turtas 2 Total investment 2 000 2 000 4 70 Materialusis
Property, plant 3 79 turtas EU funds 708 and equipment 528 400 366 Own funds
223 Intangible assets 0 0 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 Figure 50. Forecast of ON investments (on the left) and their financing sources (on the right) for 2020-2024
ANNUAL REPORT 2019 | 41 ANNEX 1
INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 31 DECEMBER 2019
42 | ANNUAL REPORT 2019 ANNUAL REPORT 2019 | 43 44 | ANNUAL REPORT 2019 ANNUAL REPORT 2019 | 45 46 | ANNUAL REPORT 2019 ANNUAL REPORT 2019 | 47 ANNEX 2 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31 DECEMBER 2019 (all the amounts are presented in thousands of euros, unless stated otherwise)
NotesNotes 3131 December December 2019 2019 31 December 2018 ASSETSASSETS A.A. NON-CURRENTNON-CURRENT ASSETS ASSETS I.I. INTANGIBLEINTANGIBLE ASSETS ASSETS 7070 121 II.II. PROPERTY,PROPERTY, PLANTPLANT AND AND EQUIPMENT EQUIPMENT 4 4 41 41376 376 4545 972 III. THE RIGHT TO USE THE ASSET 21 379 - III. THE RIGHT TO USE THE ASSET 21 379 - III. DEFERRED TAX ASSETS 18 1 259 1 053 III. DEFERRED TAX ASSETS 18 1 259 1 053 TOTAL NON-CURRENT ASSETS 43 084 47 146 TOTAL NON-CURRENT ASSETS 43 084 47 146 B. CURRENT ASSETS B. CURRENT ASSETS I. INVENTORIES 7 4 I. INVENTORIES 7 4 II. TRADE DEBTORS AND OTHER RECEIVABLES 5 5 295 5 644
II.III. TRADEFIXED DEBTORSDEPOSITS AND OTHER RECEIVABLES 5 6 5 2952 000 52 000644
III.IV. FIXEDCASH DEPOSITS AND CASH EQUIVALENTS 6 6 2 19000 102 142 582000
IV. CASHTOTAL AND CURRENT CASH ASSETS EQUIVALENTS 6 19 26102 404 1422 230582 TOTAL CURRENT ASSETS 26 404 22 230 TOTAL ASSETS 69 488 69 376 TOTAL ASSETS 69 488 69 376 EQUITYEQUITY AND AND LIABILITIES LIABILITIES C.C. EQUITYEQUITY I.I. OWNEROWNER CAPITAL CAPITAL 7 7 34 34672 672 3838 131131 II.II. LEGALLEGAL RESERVE RESERVE 7 7 2 1552 155 2 155155 III. REVALUATION RESERVE 7 801 1 261 III. REVALUATION RESERVE 7 801 1 261 IV. OTHER RESERVES 7 6 949 6 849 IV. OTHER RESERVES 7 6 949 6 849 V. RETAINED EARNINGS - PROFIT (LOSS) 8 3 522 1 199 V. RETAINED EARNINGS - PROFIT (LOSS) 8 3 522 1 199 TOTAL EQUITY 48 099 49 595 TOTAL EQUITY 48 099 49 595 D. ACCOUNTS PAYABLE AND OTHER LIABILITIES D. ACCOUNTS PAYABLE AND OTHER LIABILITIES I. ACCOUNTSACCOUNTS PAYABLEPAYABLE AFTER AFTER ONE YEAR ONE AND YEAR NON-CURRENT AND NON-CURRENT LIABILITIES I. I.1. LIABILITIESDEFERRED INCOME 9 7 138 5 911 I.1. DEFERRED INCOME 7 138 5 911 I.2. CONTRACT LIABILITIES 9 10 2 438 2 900 I.2. CONTRACT LIABILITIES 2 438 2 900 I.3. EMPLOYEE BENEFITS 10 12 768 1 015 I.3. EMPLOYEE BENEFITS 768 1 015 I.4. LEASE RELATED LIABILITIES 12 21 236 - I.4. LEASE RELATED LIABILITIES 21 236 - 10 580 9 826 10 580 9 826 II. ACCOUNTSACCOUNTS PAYABLEPAYABLE WITHIN WITHIN ONE YEAR ONE AND YEAR CURRENT AND LIABILITIES CURRENT II. II.1. LIABILITIESTRADE PAYABLES AND OTHER CURRENT LIABILITIES 11 3 737 5 914 II.1.II.2. TRADEDEFERRED PAYABLES INCOME AND OTHER CURRENT LIABILITIES 11 9 3 1737 140 5 914- II.2.II.3. DEFERREDCONTRACT INCOMELIABILITIES 9 10 1 2140 900 916 - II.3.II.4 CONTRACTEMPLOYEE BENEFITS LIABILITIES 10 12 2 2900 123 1 815916 II.4II.5. EMPLOYEEPROVISIONS BENEFITS 12 22 2 123163 1225 815 II.5.II.6. PROVISIONSCORPORATE INCOME TAX PAYABLE 22 163603 1 085225
II.6.II.7. CORPORATELEASE RELATED INCOME LIABILITIES TAX PAYABLE 21 603143 1 085- II.7. LEASE RELATED LIABILITIES 21 10143 809 9 955 - TOTAL ACCOUNTS PAYABLE AND LIABILITIES 1021 809 389 199 781 955 TOTAL ACCOUNTS PAYABLE AND LIABILITIES 21 389 19 781 TOTAL EQUITY AND LIABILITIES 69 488 69 376 TOTAL EQUITY AND LIABILITIES 69 488 69 376
The accompanying explanatory notes form an integral part of these financial statements.
48 | ANNUAL REPORT 2019 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED AT 31 DECEMBER 2019 (all the amounts are presented in thousands of euros, unless stated otherwise) Notes 2019 2018
I. SALES 13 27 697 29 519 II. COST OF SALES 14 (18 252) (18 613) III. GROSS PROFIT 9 445 10 906
IV. GENERAL AND ADMINISTRATIVE EXPENSES 15 (5 565) (6 233) V. OTHER INCOME 16 1 272 749 VI. OTHER EXPENSES 16 (1 280) (1 300) VII. OPERATING PROFIT 3 872 4 122
VIII. FINANCE INCOME 194 17 IX. FINANCE EXPENSES - (1)
X. PROFIT BEFORE TAX 4 066 4 138
XI. CORPORATE INCOME TAX 17, 18 (971) 191
XII. NET PROFIT 3 095 4 329
XIII. OTHER COMPREHENSIVE INCOME DEFERRED TAX LIABILITY 18 82 (223 XIV. TOTAL COMPREHENSIVE INCOME 3 180 4 106
The accompanying explanatory notes form an integral part of these financial statements.
ANNUAL REPORT 2019 | 49 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED AT 31 DECEMBER 2019 (all the amounts are presented in thousands of euros, unless stated otherwise)
Legal Revaluation Other Capital reserve reserve reserves Retained earnings Total
Balance at 31 December 2017 38 141 2 155 1 927 5 797 (2 003) 46 017
Impact of changes in the accounting ------policies Impact of correction of errors ------Balance recalculated at 31 December 2017 38 141 2 155 1 927 5 797 (2 003) 46 017
Net profit for the year - - - - 4 329 4 329 Other comprehensive income (Note 18) - - (223) - - (223)
Total comprehensive income - - (223) - 4 329 4 106
Transfer of assets (10) - (18) - - (28) Profit contribution - - - - (500) (500) Transfer to other reserves - - - 1 052 (1 052) - Reclassification of revaluation reserve to - - (425) - 425 - retained earnings
Balance at 31 December 2018 38 131 2 155 1 261 6 849 1 199 49 595
Net profit for the year - - - - 3 095 3 095 Other comprehensive income (Note 18) - - 82 - - 82
Total comprehensive income - - 82 - 3 095 3 177
Transfer of assets (Notes 7, 20) (3 459) - (114) - - (3 573) Profit contribution - - - - (1 100) (1 100) Transfer to other reserves - - - 100 (100) - Reclassification of depreciation of - - (428) - 428 - revaluation reserve to retained earnings
Balance at 31 December 2019 34 672 2 155 801 6 949 3 522 48 099
The accompanying explanatory notes form an integral part of these financial statements.
50 | ANNUAL REPORT 2019 STATEMENT OF CASH FLOW FOR THE YEAR ENDED AT 31 DECEMBER 2019 (all the amounts are presented in thousands of euros, unless stated otherwise)
2019 2018
I. CASH FLOWS FROM OPERATING ACTIVITIES I.1. Net profit before tax 4 066 4 138
Adjustments for non-monetary expenses (income) I.2. Depreciation and amortisation expenses 3 477 3 215 I.3. Elimination of effects of financing and investing activities (194) (17) I.4. (Profit) loss from disposal and write-off of property, plant and equipment 3 8 I.5. Impairment allowance for doubtful accounts receivable (reversal) (30) 237 I.6. Share of received grants accounted for in the statement of comprehensive income (967) - I.7. Other non-monetary items 50 (388)
Changes in working capital I.8. Increase (decrease) of inventories (3) (2) I.9. Increase (decrease) in trade debtors and other receivables 667 (309) I.10. Increase (decrease) in trade payables and other current liabilities (2 800) 299 I.11. Increase (decrease) in employee benefits 61 89 I.12. Increase (decrease) in provisions 1 460 2 616 I.13 (Paid) corporate income tax (1 085) (10) NET CASH FROM OPERATING ACTIVITIES 4 705 9 876
II. CASH FLOWS FROM INVESTING ACTIVITIES II.1. Acquisition of intangible assets and property, plant and equipment (2 246) (7 968) II.2. Proceeds from disposal of property, plant and equipment - 5 II.3. Received interests and fines 194 17 II.4. Cash withdrawal from fixed deposits - 3 000 NET CASH FLOWS FROM INVESTING ACTIVITIES (2 052) (4 946)
III. CASH FLOWS FROM FINANCING ACTIVITIES III.1. Grants and subsidies received 3 046 3 513 III.2. Profit contribution paid (1 100) (500) III.3. Lease payments (except for current and low value assets) (79) - NET CASH FLOWS FROM FINANCING ACTIVITIES 1 867 3 013
IV. INCREASE (DECREASE) IN NET CASH FLOW 4 520 7 943
V. CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 14 582 6 639 VI. CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 19 102 14 582
VII. ADDITIONAL INFORMATION ON CASH FLOWS: Non-monetary investing activities: the account payable for acquisition of property, plant and equipment accounted for 84 3 415 at the end of the year
The accompanying explanatory notes form an integral part of these financial statements.
ANNUAL REPORT 2019 | 51 EXPLANATORY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED AT 31 DECEMBER 2019 (all the amounts are presented in thousands of euros, unless stated otherwise)
1. General information SE Oro Navigacija (hereinafter referred to as the Enterprise) is a limited liability company established by the Republic of Lithuania providing air traffic control and air navigation services in the airspace of the Republic of Lithuania as well as air traffic control for landing and taking-off aircraft and the related aerodrome services at Vilnius, Kaunas, Šiauliai ir Palanga airports. The main customers of the Enterprise are foreign airlines. The registered office of the Enterprise is located at B. Karvelio St. 25, Vilnius. 290 employees were working at the Enterprise on 31 December 2019 (31 December 2018: 285 employees). In order to ensure compliance of tariffs with the general charging principles applied to air navigation services worldwide, all the information is pro- vided to the Ministry of Transport and Communications of the Republic of Lithuania, Eurocontrol and the European Commission and the tariffs are coordinated with representatives of airspace users – the International Air Transport Association (IATA), the International Air Carrier Association (IACA) as well as various organisations representing general aviation. The activity of the Enterprise is regulated by the International Standards for Air Transport (ISAT), legal acts of the International Civil Aviation Organi- zation (ICAO), the European Union, the European Organization for the Safety of Air Navigation (Eurocontrol), the Law on Aviation of the Republic of Lithuania and other documents. 2. Summary of significant accounting principles 2.1 Basis for preparation of financial statements
These financial statements have been prepared in accordance with International Financial Reporting Standards (hereinafter IFRSs), as adopted by the European Union (hereinafter the EU). The financial statements have been prepared under the historical cost basis.
2.2 New standards, amendments and interpretations that are not yet effective During the reporting year the Enterprise commenced applying all the new standards, their amendments and interpretations applicable to the activity of the Enterprise for the accounting periods starting from 1 January 2019. The application of new standards, their amendments and interpretations had no material impact on the financial statements of the Enterprise. Several new standards, their amendments and interpretations are effective for the annual accounting periods starting from 1 January 2019, with earlier application permitted. However, when preparing these financial statements, the Enterprise decided not to apply the new standards or amend- ments in advance. Standards which may have potential impact on the Enterprise, and the decisions of the management in relation to potential impact upon starting application of new or revised standards and interpretations are set out below. Amendments to references to conceptual framework of IFRS standards (effective for annual periods beginning on or after 1 January 2020) The main changes to the framework’s principles have implications for how and when assets and liabilities are recognised and derecognised in the financial statements. They encompass: 1) new ‘bundles of rights’ approach to assets – in some circumstances a company would book a right to use an asset rather than property, plant and equipment itself; 2) new ‘practical ability’ approach for recognising liabilities – the liabilities shall only be recognized if the company has no practical ability to avoid it; 3) new control-based approach to derecognition of an asset - a company will take an asset off balance sheet when it loses control over all or part of it. Based on the Enterprise’s management preliminary assessment, adoption of these amendments will have limited or no impact on the financial state- ments of the Enteprise. Amendments to IAS 1 “Presentation of Financial Statements” and IAS 8 “Accounting policies, changes in accounting estimates and errors” (effec- tive for annual periods beginning on or after 1 January 2020) The main amendments are related to the refined definition of materiality as well as explanation which part of the accounting policy of the Enterprise is required to be disclosed the financial statements. Based on the Enterprise’s management preliminary assessment, adoption of these amendments will have limited or no impact on the financial statements of the Enteprise. There are no other new or revised standards or interpretations that are not yet effective that could have a material impact on the financial statement of the Enterprise. 2.3 Functional and financial statements currency
The Enterprise’s functional and financial statements currency is euro. Financial statements are prepared in thousands of euro.
52 | ANNUAL REPORT 2019 2.4 Intangible assets
Intangible assets are measured initially at cost. Intangible assets are recognized if it is probable that future economic benefits that are attributable to the asset will flow to the Enterprise and the cost of asset can be measured reliably. After initial recognition, intangible assets are measured at cost less accumulated amortization and any accumulated impairment losses. Intangible assets are amortized on a straight-line basis over the best estimate of their useful lives. The useful lives, residual values and the method of amortization are reviewed annually, to ensure that they are consistent with the expected pattern of use of intangible asset. The following groups of intangible assets and the useful life duration thereof have been established: Group of intangible assets Useful lives Patents, licences 3 years Software 3 years Other intangible assets 4 years
The costs of acquisition of new software are capitalized and treated as an intangible asset if these costs are not an integral part of the related hard- ware. Costs incurred in order to restore or maintain the future economic benefits that the Enterprise expects from the originally assessed standard of per- formance of existing software systems are recognized as an expense when the restoration or maintenance work is carried out. 2.5 Property, plant and equipment
Property, plant and equipment except for buildings and structures, are accounted for at acquisition cost less accumulated depreciation and the im- pairment losses, if any. The buildings and structures are accounted for at the revalued value, having deducted the impairment losses. The impairment losses are presented under general and administrative expenses. The initial cost of property, plant and equipment comprises its acquisirtion price, including non-refundable purchase taxes and any directly attribut- able costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the property, plant and equip- ment have been put into operation, such as repair and maintenance costs, are normally charged to profit or loss in the period the costs are incurred. The depreciation is calculated on the straight line basis over the following estimated useful life periods: Group of property, plant and equipment Useful lives Buildings and structures 25-90 years Machinery and equipment 5 -25 years Vehicles 6 years Other assets 4-7 years
Every component of property, plant and equipment the cost of which is significant in respect of the total acquisition cost, is depreciated within a different period of time, complying with the most economically useful life duration thereof. The assets’ residual values and useful lives are reviewed periodically to ensure that the period of depreciation is consistent with the expected pattern of economic benefits from items in property, plant and equipment.The impact of revision, if any, is recognised perspectively. The depreciation costs are presented under cost of sales and general and administrative expenses. When assets are sold or written-off, their cost and accumulated depreciation are eliminated from the accounts and any gain or loss resulting from their disposal is included in profit or loss. Construction in progress is accounted for at acquisition cost. This includes the cost of construction, plant and equipment and other directly attribut- able costs. Construction-in-progress is not depreciated until the relevant assets are completed and available for use. Spare parts are classified as property, plant and equipment if they meet the definition, including the requirement to be used over more than one period. Otherwise, they are classified as inventory.
2.6 Impairment of non-financial assets At each financial reporting date, the Enterprise reviews the carrying amount of intangible assets and property, plant and equipment to determine wheth- er there is any indication that the value of an asset has decreased. If such indications are present, the Enterprise assesses the recoverable amount of the asset in order to measure the impairment (if any). When it is impracticable to assess the recoverable amount of the asset, the Enterprise calculates the recoverable amount of the income-generating unit to which the asset belongs. The recoverable amount is the higher of the fair value less costs to sell and value in use. In determining value in use, estimates of future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and asset-specific risk. If it is determined that the recoverable amount of an asset (or cash-generating unit) is less than the carrying amount of the asset, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are immediately recognized as expense.
ANNUAL REPORT 2019 | 53 If the impairment loss is subsequently reversed, the carrying amount of the asset (or cash-generating unit) is increased to the recoverable amount of the asset, but in such a way that the increased carrying amount does not exceed the carrying amount that would be determined if, in the previous year, that asset (or cash-generating unit) would not be recognized for impairment losses. Reversal of impairment losses is immediately recognized as income. 2.7 Financial instruments
Financial assets
The financial assets of the Enterprise include cash and cash equivalents, trade debtors and other receivables. Trade debtors are initially recognized when they arise. Upon initial recognition, all other financial assets are recognized when the Enterprise become parties to the contractual provisions of the instrument. Financial assets (except for trade debtors without a significant financing component), if not measured at fair value through profit or loss, are initially measured at fair value plus transaction costs directly attributable with acquisition or issue. Trade debtors without a significant financing component are initially recognized at the transaction price. Financial assets are classified in three groups according to their measurement: i. financial assets that are subsequently measured at amortized cost; ii. financial assets that are subsequently measured at fair value through other comprehensive income; iii. financial assets that are subsequently measured at fair value through profit or loss. The classification of a financial asset depends on the financial asset management business model (assessing how the entity manages the financial assets to generate cash flows) and the characteristics of the contractual cash flows of the financial asset (whether contractual cash flows include only principal and interest payments). Financial asset is stated at amortized cost if both of the following conditions are satisfied: 1) financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and 2) its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interests on the principal amount outstanding.
Financial assets that do not meet the above conditions are measured at fair value through profit or loss and through other comprehensive income. In 2019 and 2018 the Enterprise had no financial assets, which, in subsequent periods, are measured at fair value through profit or loss and other comprehensive income. Financial assets that are subsequently measured at amortized cost are measured using the effective interest method. Amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment losses are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. The effective interest method is a method of calculating the amortized cost of a financial asset or liability and of allocating the interest income or expense over a period of time. The effective interest rate is the rate that discounts estimated future cash payments through the expected life of the financial asset or liability or, where appropriate, a shorter period. Financial assets at fair value through profit or loss are initially recognized at fair value through profit or loss. Subsequently, the fair value gain and loss, including any interest and dividends, is recognized in profit or loss and other comprehensive income.
Financial liabilities
The Entitiy’s financial liabilities comprise trade payables and other payables. At the time of initial recognition, financial liabilities are recognised when the Enterprise becomes a party to the contractual terms of the instrument. Financial liabilities are divided into two groups according to their measurement: i. financial liabilities that are subsequently measured at amortised cost; ii. financial liabilities that are subsequently measured at fair value through profit or loss.
A financial liability is classified as at fair value through profit or loss if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at fair value through profit or loss are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. The Enterprise derecognises financial liabilities when their contractual obligations are discharged or cancelled or expire. The Enterprise also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different. In this case, the new financial liability is recognized at fair value under the modified terms of the contract. In the event of derecognition of a financial liability, the difference between the carrying amount written off and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss in the statement of profit or loss and other comprehensive income. Trade and other payables. Upon initial recognition, trade and other payables are recognized when the Enterprise becomes a party to the contractual provisions. Trade and other payables are initially measured at fair value plus directly attributable transaction costs.
54 | ANNUAL REPORT 2019 Offsetting financial assets and financial liabilities Financial assets and financial liabilities are offset when, and only when, the Enterprise has a legally enforceable right to set off the amounts and it intends either to settle them on the net basis or to realise the asset and settle the liability simultaneously.
2.8 Impairment of financial assets
Impairment losses on financial assets measured at amortized cost are measured using the expected credit loss (ECL) model. Credit losses are mea- sured at the present value of all cash losses (the difference between the cash flows that the Enterprise holds under the contract and the cash flows the Enterprise expects to receive). ECLs are discounted applying an effective interest rate. At the end of each reporting period, the Enterprise recalculates and records the allowance for expected credit losses, taking into account past events, current market conditions and future prospects. At the end of each financial period, the Enterprise assesses whether there has been a material change in the credit risk of the financial instrument since initial recognition. At the end of each reporting period, the Enterprise assesses whether financial assets carried at amortized cost are impaired. A financial asset is im- paired when one or more events have occurred that have a negative impact on the estimated future cash flows of the financial asset. The following criteria are used by the Enteprise to determine whether there is objective evidence that an impairment loss has been incurred: i. the counterparty experiences financial difficulties as evidenced by its financial information; ii. in the event of a breach of contract, such as a default or payment delay more than 90 days; iii. the counterparty is considering bankruptcy or financial reorganization; iv. there is an adverse change in the payment status of the counterparty’s as a result of changes in national or local economic conditions affect- ing the counterparty; or v. the value of collateral, if any, significantly decreases as a result of deteriorating market conditions. Losses on financial assets measured at amortized cost are deducted from the gross value of such assets. The gross carrying amount of a financial asset is written off when the Enterprise has no reasonable expectation of recovering all or part of the asset. Non-recoverable assets are written off against recognized related impairment loss allowance, provided that all necessary steps have been taken to recover the asset and the amount of the loss has been determined. The amounts previously written off and recovered in subsequent periods are credited to the impairment loss account within the statement of profit or loss and other comprehensive income.
2. 9 Inventories
Inventories are initially recorded at acquisition cost. Subsequent to initial recognition, inventories are valued at the lower of cost or net realizable value. Net realizable value is the selling price in the ordinary course of business, less the costs related to sales. Cost of sale is determined by the first- in, first-out (FIFO) method.
2.10 Grants Grants are accounted for on the accrual basis, i.e. grants received or the parts thereof are recognized as used in the periods during which the costs associated with the grant are incurred.
Grants related to assets
Grants related to assets include grants that are received in the form of non-current assets or are intended for acquisition of non-current assets. Grants are recognized at fair value of the resulting assets and are subsequently recognized as income, reducing the depreciation/amortization expense over the useful life of the related non-current asset. Grants related to income Grants related to income include grants received for reimbursement of expenses and income not received, as well as all other grants not attributable to grants related to assets. A grant is recognized when it is actually received or when there is reasonable assurance that it will be received.
2.11 Finance and operating lease (accounting principles effective until 31 December 2018) Finance lease – the Enterprise is the lessee Leases of property, plant and equipment where the Enterprise has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the estimated present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant interest rate on the finance lease balance outstanding. The corresponding rental obligations, net of finance charges, are included in long-term payables except for instalments due within 12 months which are included in current liabilities. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the asset’s useful life and the lease term.
ANNUAL REPORT 2019 | 55 Operating lease – the Enterprise is the lesee
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
Operating lease – the Enterprise is the lessor
Payments received under operating leases (net of any incentives given to the lessee) are recognized in profit or loss on a straight-line basis over the period of the lease.
2.12 Lease (accounting principles effective since 1 January 2019) Following the provisions of IFRS the Enterprise first of all assesses whether the concluded contract qualifies for the lease. In case the contract qualifies for the lease (it provides the right to use defined asset for a certain period of time for a pre-defined price), the below described accounting principles are applied in accordance with IFRS 16. Finance and operating lease – the Enterprise is the lessee The Enterprise recognises the right to use the assets and lease liability when the lease period commences. The right to use the asset during the initial recognition is accounted for at acquisition cost, which is composed of initial lease liability less discounts and lease contributions paid before the com- mencement of the lease period or on the first day of the lease period, and increased by the amount of related direct expenses. After the initial recognition the right to use the asset is depreciated on a straight-line basis over the period of the lease, except for the cases, when at the end of lease period the ownership of the asset is transferred to the Enterprise or it is probable that at the end of the lease period the Enter- prise will exercise the option to purchase the asset. In such cases the right to use the asset is depreciated over the useful life of the assets. The right to use the asset is presented net of impairment losses (if any) and adjusted accordingly if the lease liability is reassessed due to the changes in the circumstances. The initial amount of lease liability is recognized at present value of unpaid lease payments at the date of the lease period commencment. The discount rate applied equals to the interest rate indicated in the lease contract, if such is indicated, or to average alternative interest rate which the Enterprise would likely pay to the borrower for the loan used for acquisition of the leased asset. Short-term lease and lease of low-value assets The Enterprise decided not to recognise the right to use the assets and lease liability for short-term lease and lease of low-value assets. Such lease payments are recognised as expenses in profit or loss on straight-line basis over the period of the lease. Since on 31 December 2018 the Enterprise had no other lease, but short-term and low-value lease, there was no impact on the financial statements of the Enterprise on 1 January 2019 with regards to the application of the new IFRS 16. Operating lease – the Enterprise as the lessor Payments received under operating leases (net of any incentives given to the lessee) are recognized in profit or loss on a straight-line basis over the period of the lease.
2.13 Employee benefits
Benefits for employees leaving for retirement According to the requirements of the Labour Code of the Republic of Lithuania, each employee leaving the Enterprise at retirement age, is entitled to a one-time termination benefit of two average wages and, if the employment relationship lasts less than one year, - of one wage. Actuarial cal- culations are made to determine liability for such payments. The liability is recognised at present value discounted using market interest rate of the Government securities, expressed in the same currency as that of the benefits, provided that their pay-out term is similar to the envisaged benefit pay-out term. The Enterprise recognises the change in the liability associated with the retirement benefits in profit (loss). Jubilee benefits In accordance with the Collective Bargaining Agreement valid at the Enterprise every employee of the Enterprise is entitled to jubilee benefit. Actu- arial calculations are made to determine liability for such payments. The liability is recognised at present value discounted using market interest rate of the Government securities, expressed in the same currency as that of the benefits, provided that their pay-out term is similar to the envisaged benefit pay-out term. The Enterprise recognises the change in the jubilee benefits in profit (loss).
Other benefits defined under the Collective Bargaining Agreement
In accordance with the Collective Bargaining Agreement every employee of the Enterprise is entitled to receive a lump-sum annual benefit of pre- defined amount. The Enterprise makes the calculations in order to assess the liability associated with such benefits. The change in the liability is recognised in profit (loss).
56 | ANNUAL REPORT 2019 2.14 Provisions Provisions are recognized when the Enterprise has a present obligation (legal or constructive) as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The provisions are reviewed at each statement of financial position date and adjusted in order to present the most reasonable current estimate. If the effect of the time value of money is material, the amount of provision is equal to the present value of the expenses, which are expected to be incurred to settle the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a borrowing cost. 2.15 Corporate income tax and deferred tax The corporate income tax is calculated in accordance with the requirements established under the Law on Taxes of the Republic of Lithuania. In 2019 the standard corporate income tax rate that the companies were subject to in the Republic of Lithuania was 15 percent (2018: 15 percent). Deferred taxes are calculated using the liability method. Deferred income taxes reflect the net tax effects of temporary differences between the carry- ing amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse based on tax rates enacted or substantively enacted at the reporting date. A deferred tax asset is recognized in the statement of financial position to the extent the management believes it will be realized in the foreseeable future, based on taxable profit forecasts. If it is believed that part of the deferred tax asset is not going to be realized, this part of the deferred tax asset is not recognized in the financial statements. Deferred tax assets and liabilities are offset when they are related to taxes levied by the same tax authority and when there is a legally enforceable right to cover current payable taxes at net value. Income tax and deferred income tax are charged or credited to profit or loss, except when they relate to items included directly to equity, in which case the deferred income tax is also accounted for in other comprehensive income. 2.16 Revenue recognition The Enterprise recognize revenue at such time and to such an extent that the transfer of goods or services to customers represents the consideration that the Enterprise expect to receive in exchange for those goods or services. The Enterprise›s revenue is recognized using the 5-step model: Step 1 - Identify customer agreements. A contract recognizes an agreement between two or more parties (subject to purchase / sale terms) that creates enforceable rights and enforceable obligations (not applicable if a joint venture agreement is signed). A contract is within the scope of IFRS 15 if all of the following criteria are met: • the parties have approved the contract (in writing, orally or in accordance with any other normal commercial practice) and are bound by their obligations under the contract, • it is possible to identify the rights of each party with regard to the goods and / or services to be transferred, • it is possible to identify the payment terms for the goods and / or services to be transferred, • the contract has commercial substance, • it is probable that the consideration to which the Enterprise is entitled to in exchange for the goods or services will be collected. Contracts with the customer may be aggregated or disaggregated into several contracts, while retaining the criteria of former contracts. Such aggregation or disaggregation is considered modification of the contract.
Step 2 - Identify performance obligations in the contract. Contractual commitment to deliver goods and / or services to a customer. If separate goods and/or services are identifiable, the liabilities are recognized separately. Each liability is identified in one of two ways: • a good and / or service is distinct, or • a set of individual goods and / or services that are substantially the same and have the same pattern of transfer to the customer.
Step 3 - Determine the transaction price. The transaction price may be fixed, variable, or both. The transactions concluded by the Enterprise apply fixed prices for services performed at a certain point in time. The transaction price is also adjusted considering the time value of money, if the contract includes a significant financing arrangement, and considering any consideration payable to the customer and non-cash consideration received, if any. The Enterprise apply the following sales price calculation methods: adjusted market assessment approach, expected cost plus margin approach and residual approach. Similar transactions are measured equally.
ANNUAL REPORT 2019 | 57 Step 4 - Allocate the transaction price to each performance obligation. A performance obligation is a contractual promise to deliver to the customer a separate good or service, or a set of individual goods or services that are substantially the same and have the same pattern of transfer to the customer. The transaction price is apportioned between each performance obligation based on the relative separate selling prices of the good or service promised in the contract. If the contracts do not specify separately the price of the service or good (for example, one price for two products), the Enterprise shall determine it. In measuring the transaction price, the Enterprise estimates a discount or variable amount of consideration that relates only to a particular portion of the contract.
Step 5 - Recognise revenue when (or as) the Enterprise satisfy a performance obligation. The Enterprise recognize revenue when they satisfy a performance obligation by transferring promised goods or services to the customer (i.e. when the customer obtains control of the mentioned goods or services). The recognized amount of revenue is equal to the amount of satisfied performance obligation. Performance obligation may be satisfied at a point of time or over time. A period of time is recognised as a calendar month. The recognition of revenue depends on whether the obligation is satisfied over a period of time (continuous) or at a point in time. In any event, the transfer of control shall be taken into account. Revenue is recognized at the fair value of the consideration received or receivable. Revenue is reduced by the estimated amount of customer returns, discounts, and other similar provisions. Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of the revenue can be measured reliably. Revenue from sales is recognized net of VAT and discounts, including any cumulative expected discounts for the current year. The income of the Enterprise is mostly composed of the income received for the provided route and terminal air navigation services. The Enterprise also provides additional services: provision of pre-flight air navigation information to the crews of the aircraft, provision of radar information to the Lithuanian Armed Forces, various other services provided at Vilnius, Kaunas, Šiauliai and Palanga Airports. Income from en-route air navigation services are calculated on the basis of tariffs determined in conformity with the Commission Implementing Regulation (EU) No 2019/317 of 11 February 2019 laying down a common charging scheme for air navigation services and the Multilateral Agreement Related to Route Charges. Route charge is collected for air traffic services provided to an aircraft flying over the airspace controlled by Lithuania. The rate of route charge is calculated according to the following formula: R = W x P x D, where: – R – the rate of route charge; – W – the mass factor (W = √(MTOM/50), MTOM – the maximum take-off mass rounded after the decimal point in the usual manner); – P – the unit rate of route charge; – D – the great circle distance divided by 100. Income from terminal air navigation services are calculated on the basis of tariffs determined in conformity with the Commission Implementing Regulation (EU) No 2019/317 of 11 February 2019 laying down a common charging scheme for air navigation services. Terminal charge is collected for air navigation services provided to aircraft landing at the airports. The rate of terminal charge is calculated according to the following formula: T = I x W, where: – T – the rate of terminal charge; – I – the terminal service unit rate; – W – the mass factor ((W = (MTOM/50)0.7, MTOM – the maximum take-off mass rounded after the decimal point in the usual manner). According to the Commission Implementing Regulation (EU) No 2019/317 of 11 February 2019, the charges for air navigation services shall be determined so that the income actually earned covers the costs actually incurred. The amounts payable arising due to the income earned that exceeds the actual costs, is recorded as contract liabilities and the recognised income of the respectful year is decreased accordingly. In case the income earned does not cover the actually incurred service provision costs, the amounts receivable are accounted for as contract assets and the recognized income of the reporting period is increased accordingly. 2.17 Recognition of expenses Expenses are recognized on the basis of accrual and revenue and expense matching principles in the reporting period when the income related to these expenses was earned, irrespective of the time the money was spent. In those cases when the costs incurred cannot be directly attributed to the specific income and they will not bring income during the future periods, they are expensed as incurred. The amount of expenses is usually accounted for as the amount paid or due, excluding VAT. In the cases when a long period of payment is established and the interest is not distinguished, the amount of expenses shall be estimated by discounting the amount of payment using the market interest rate. 2.18 Foreign currency transactions Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies on the statement of financial position date are recognized in profit or loss. Such balances are translated at period-end exchange rates. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to euro at foreign exchange rates ruling at the dates the fair value was determined.
58 | ANNUAL REPORT 2019 2.19 Using the accounting estimates in preparation of financial statements The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, income and costs and disclosure of contingencies, at the reporting date and within the next financial year. Estimates and judgements are continually evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The significant areas of these financial statements, where the accounting estimates are used, include depreciation (Notes 2.5 and 4), amortization (Notes 2.4), impairment of property, plant and equipment (Notes 2.5 and 4), employee benefits (Notes 2.13 and 12), contract liabilities, arising due to the difference in the income earned by the Enterprise from air navigation services and expenses incurred for earning that income (Notes 2.16 and 10), assessment of the deferred tax asset (Notes 2.15 and 18). 2.20 Fair value measurement Some of the Enterprise’s accounting policies and disclosures require to estimate the fair value of financial and non-financial assets and liabilities. Fair value is the price that would be received to sell or paid to transfer a liability in an ordinary transaction between market participants on a principal market, or in the absence of a principal market, on the most advantageous market into which the Enterprise may enter on the date of measurement. The fair value reflects the non-performance risk. To measure the fair value of assets and liabilities, the Enterprise, to the extent possible, rests on the available data on the market. For fair value mea- surement, a fair value hierarchy is used, on the basis of the inputs used in valuation: • Level 1: the quoted prices of active markets for identical assets or liabilities (unadjusted); • Level 2: other variables than the quoted prices included under level 1 that are observed for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices); • Level 3: asset or liability variables, which are not based on the observed market data (unobserved variables). If the inputs, used for measurement of the fair value, may be attributed to different levels of a fair value hierarchy, the level of the fair value hierarchy, to which the total measured value is attributed, shall be measured on the basis of the input of the lowest level, significant to the measurement of the total fair value. The Enterprise recognizes the amounts of transfers between levels of the fair value hierarchy at the end of the reporting period, when the change occurs. 2.21 Contingencies Contingent liabilities are not recognized in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognized in the financial statements but disclosed when an inflow of economic benefits is probable. 2.22 Events after the reporting period
Events after the reporting date that provide additional information about the Group’s and the Company’s position at the statement of financial- po sition date (adjusting events) are reflected in the financial statements. Events after the reporting date that are not adjusting events are disclosed in the notes when material.
ANNUAL REPORT 2019 | 59 3. Financial risk management
Financial risk is composed of credit risk, liquidity risk and market risk (foreign currency risk and interest rate risk). The Enterprise’s activities expose it to credit risk and liquidity risk.The Enterprise is not subject to market risk, because both in 2019 and in 2018 the Enterprise had no loans and bor- rowing and all the assets as well as liabilities of the Enterprise were denominated in euros. The credit and liquidity risks incurred by the Enterprise are minimal. By managing these risks, the Enterprise seeks to reduce the impact of factors that could negatively affect the Enterprise’s financial performance. Credit risk Since the Enterprise works with many customers, the concentration of the Enterprise’s trading partners is not high. As at 31 December 2019 the Enterprise’s accounts receivable from two main customers made up respectively 6.8 percent and 5.8 percent of total amount of trade receivables (31 December 2018: 6.9 percent and 6.2 percent). The carrying amount of financial assets reflects the highest possible credit risk. The maximum credit risk at the reporting date was: 2019 2018
Fixed deposits 2 000 2 000 Trade debtors 2 187 2 657 Cash and cash equivalents 19 102 14 582 Total 23 289 19 239
Analysis of ageing of the accounts receivable is presented in Note 5.
The maximum credit risk associated with trade debtors by geographic regions was: 2019 2018
Lithuania 180 176 EU member states 1 217 1 444 Non-EU states 1 290 1 567 Gross value of trade debtors, total 2 687 3 187
Less: impairment allowance for doubtful trade debtors (500) (530) Total 2 187 2 657
Liquidity risk Liquidity risk means that the Enterprise may be not able to settle its financial liabilities on time. The approach of the Enterprise towards liquidity management is to ensure that its liquidity is always sufficient for timely settlement of its financial liabilities, without incurring unacceptable losses and without risking to cause damage to the reputation of the Enterprise. The Enterprise constantly keeps to the policy of maintaining sufficient amount of cash and cash equivalents and, when necessary, ensures financing through credit lines or loans. On 31 December 2019 the current liquidity ratio and quick liquidity ratio was 2.4 (31 December 2018: 2.2). The table below summarizes the terms of repayment of the Enterprise‘s financial liabilities as at 31 December 2019 and 31 December 2018 under undiscounted contractual payments: Up to 3 From 3 to 12 From 1 to 5 years After 5 years Total Carrying amount months months
Trade payables 314 - - - 314 314 Balance on 31 December 2019 314 - - - 314 314
Trade payables 1 497 - - - 1 497 1 497 Balance on 31 December 2018 1 497 - - - 1 497 1 497
60 | ANNUAL REPORT 2019 4. Property, plant and equipment
As at 31 December property, plant and equipment comprised: Buildings Construction in and Plant and Other progress and structures equipment Vehicles assets prepayments Total Acquisition costs 31 December 2017 13 385 39 152 660 765 18 178 72 140 - acquisitions - 700 - 2 10 603 11 305 - disposals and write-offs (13) (165) (82) (8) - (268) - transfer from construction in progress to property, plant and equipment 48 474 - - (522) - 31 December 2018 13 420 40 161 578 759 28 259 83 177 - acquisitions 21 355 - 45 1 902 2 323 - disposals and write-offs (5 945) (298) - (64) - (6 307) - transfer from construction in progress to property, plant and equipment 10 888 2 766 - 130 (13 796) (11) 31 December 2019 18 384 42 984 578 870 16 366 79 182
Revaluation 31 December 2017 1 927 - - - - 1 927 - value inrease ------disposals and write-offs (18) - - - - (18) 31 December 2018 1 909 - - - - 1 909 - value increase ------disposals and write-offs (139) - - - - (139) 31 December 2019 1 770 - - - - 1 770
Impairment loss 31 December 2017 (1 282) - - - - (1 282) - impairment charge ------impairment reversal ------31 December 2018 (1 282) - - - - (1 282) - impairment charge ------impairment reversal 1 - - - - 1 31 December 2019 (1 281) - - - - (1 281)
Accumulated depreciation 31 December 2017 (6 052) (27 745) (519) (640) - (34 956) - depreciation (758) (2 292) (56) (25) - (3 131) - disposals and write-offs 3 163 81 7 - 254 31 December 2018 (6 807) (29 874) (494) (658) - (37 833) - depreciation (915) (2 338) (53) (27) - (3 332) - disposals and write-offs 2 511 297 - 63 - 2 871 31 December 2019 (5 211) (31 915) (547) (622) - (38 295)
Carrying amount: 31 December 2018 7 240 10 287 84 101 28 259 45 971 31 December 2019 13 662 11 069 31 248 16 366 41 376
ANNUAL REPORT 2019 | 61 4. Property, plant and equipment (continued)
As at 31 December the depreciation of the property, plant and equipment was accounted for in the profit (loss) as follows: 2019 2018
Cost of sales 2 709 2 762 General and administrative expenses 339 165 Other expenses 284 288 Total 3 332 3 215
As at 31 December the depreciation of the property, plant and equipment was accounted for in the profit (loss) as follows: 2019 2018
Buildings and structures 864 96 Plant and equipment 17 321 15 148 Vehicles 277 249 Other assets 532 565 Total 18 994 16 058
As at 31 December the construction in progress/perpayments for property, plant and equipment comprised uncompleted projects and prepayments paid for property plants and equipment: 2019 2018
Project Estimated Estimated Estimated Estimated Carrying expenses of completion Carrying expenses of completion amount completion date amount completion date Construction of new administrative - - - 13 022 - 2019 and the ACC building Acquisition of air traffic control 13 716 - 2020 I ketv. 12 695 1 020 2019 equipment Modernisation of Advanced Surface Movement Guidance and Control 2 425 - 2020 I ketv. 2 372 50 2019 System (A-SMGCS) of Vilnius Airport Other 225 - 170 - Total 16 366 - 28 259 1 070
5. Trade debtors and other receivables
As at 31 December, trade debtors and other receivables consisted of the following: 2019 2018
Trade receivables (excluding accounts receivable from related parties), gross value 2 684 3 182 Accrued income 2 191 2 347 Deferred expenses 352 520 Receivable amounts related to projects financed by the EU funds (Note 16) 286 - Prepayments, gross value 176 58 Receivable amounts from related parties, gross value (Note 20) 3 5 Other receivable amounts, gross value 103 62 5 795 6 174
Less: impairment allowance for doubtful trade receivables (500) (530) Total 5 295 5 644
62 | ANNUAL REPORT 2019 5. Trade debtors and other receivables (continued)
Change in impairment allowance for doubtful trade debtors during the year: 2019 2018
1 January 530 292 Recognition 108 342 Usage (138) (104) Reversal - - 31 December 500 530
Change in impairment allowance for doubtful trade debtors is presented under the general and administrative expenses. On 1 September 2006 Lithuania ratified the Eurocontrol Convention and the Multilateral Agreement Related to Route Charges. According to this agreement Eurocontrol was delegated to operate the system of billing and collection of charges. The Enterprise has also signed a Bilateral Agree- ment with Eurocontrol regarding the collection of terminal charges. The term of payment of trade receivables varies from 1 to 60 days. In the opinion of the management the carrying amounts of trade and other re- ceivables are close to the fair value thereof. More detailed information on credit risk related to the accounts receivable is provided in Note 3. Infor- mation on the accounts receivable from the related parties is presented in Note 20. As at 31 December analysis of ageing of trade receivables (less impairment allowance) is presented below:
Overdue trade receivables for which the impairment allowance is Not due trade receivables for not accounted for which the impairment allowance is not accounted for Less than 30 – 90 90 – 360 More than 360 Total 30 days days days days
2019 2 128 25 23 7 4 2 187 2018 2 426 131 85 13 2 2 657
6. Cash and cash equivalents
As at 31 December 2019 cash and cash equivalents were composed of 19 102 thousand euros of cash held in the bank accounts (31 December 2018: 14 582 thousand euros).
As at 31 December the Enterprise had invested the free funds into fixed deposits at the bank: 2019 2018
Fixed deposit at Luminor bank (EUR), maturity – 18 April 2019 April 18, interest rate of 0.1 percent - 2 000 Fixed deposit at Luminor bank (EUR), maturity – 18 April 2020 April 18, interest rate of 0.1 percent 2 000 - 2 000 2 000 Less: short-term fixed deposits (2 000) (2 000) Total long-term fixed deposits - -
ANNUAL REPORT 2019 | 63 7. Capital, legal and other reserves a) Capital
The Enterprise is a state-owned company. As at 31 December 2019 the owner’s capital of the Enterprise comprised 11 454 thousand euros (31 De- cember 2018: 14 913 thousand euros). As at 31 December 2019 and 31 December 2018 the capital corresponding to assets which under laws can be owned only by the state comprised 23 218 thousand euros. In 2019 the Enterprise transferred over the property, plant and equipment (i.e. buildings and structures) to state enterprise Lithuanian Airports and Lithuanian Transport Safety Administration; the carrying value of assets transferred comprised 3 261 thousand euros and 312 thousand euros respec- tively. The owner’s capital and revaluation reserve were reduced by the amounts mentioned accordingly (Note 20). b) Legal reserve
Legal reserve is a compulsory reserve under legislation of the Republic of Lithuania. Not less than 5 percent of the distributable profit is annually transferred to this reserve until the reserve reaches the amount equal to 10 percent of the owner’s capital value. The legal reserve can only be used to cover the future losses. As at 31 December 2019 and 31 December 2018 the legal reserve comprised 2 155 thousand euros. c) Other reserves Other reserves are formed in accordance with a decision on distributable profit taken by the institution exercising the rights and obligations of the owner and are envisaged in the Articles of Association of the Enterprise. These reserves can be used only for the purposes approved by the institution exercising the rights and obligations of the owner. As at 31 December 2019 the other reserves comprised 6 949 thousand euros (31 December 2018: 6 849 thousand euros).
8. Draft for profit distribution
Amount Retained earnings – profit (loss) – at the end of previous financial year - Net profit (loss) of the financial year 3 095 Transfers from reserves 7 376 Distributable profit (loss) at the end of financial year 10 471 Profit to be appropriated to: - profit contribution 1 185 - to the reserve for investments 9 266 - to the reserve used for employee bonuses, social, cultural and similar purposes 20 - liability execution, writing-off bad debts and losses - Undistributed result – profit (loss) – at the end of the previous financial year -
64 | ANNUAL REPORT 2019 9. Deferred income Gruodžio 31 d., būsimų laikotarpių pajamas, susijusias su investiciniais projektais, finansuojamais ES lėšomis, sudarė: 31 December Recognised as in- 31 December 2019 2018 Received come in profit (loss)
Grant for acquisition of air traffic control equipment 5 409 1 263 - 6 672 Grant for modernisation of Advanced Surface Movement Guidance 502 543 and Control System (A-SMGCS) of Vilnius Airport - 1 045 Other grants - 561 - 561 Total 5 911 2 367 - 8 278
31 December Recognised as in- 31 December 2018 2017 Received come in profit (loss)
Grant for acquisition of air traffic control equipment 2 090 - - 5 409 Grant for modernisation of Advanced Surface Movement Guidance 502 - - 502 and Control System (A-SMGCS) of Vilnius Airport Other grants 194 194 (388) - Total 2 786 194 (388) 5 911
As at 31 December the non-current and current share of the deferred income related to investment projects, financed from the EU funds, were composed of: 2019 2018 Non-current Non-current share Current share share Current share
Grant for acquisition of air traffic control equipment 6 171 501 5 409 - Grant for modernisation of Advanced Surface Movement Guid- 967 78 502 - ance and Control System (A-SMGCS) of Vilnius Airport Other grants - 561 - - Total 7 138 1 140 5 911 -
In 2016 the Enterprise received a grant for acquisition of property, plant and equipment (i.e. the air traffic control equipment). In October 2016 a financing agreement was signed with the Innovation Network Executive Agency (INEA) for a maximum available funding of 6 672 thousand euros. The funding received by 31 December 2019 comprised 6 672 thousand euros (31 December 2018: 5 409 thousand euros). In 2016 the Enterprise received a grant for modernization of property, plant and equipment – Advanced Surface Movement Guidance and Control System (A-SMGCS) of Vilnius Airport. In October 2016 a financing agreement with the Innovation Network Executive Agency (INEA) was signed for a maximum available funding of 1 255 thousand euros. By 31 December 2019 the funding of 1 045 thousand euros was received (31 December 2018: 502 thousand euros).
ANNUAL REPORT 2019 | 65 10. Contract liabilities
The contract liabilities for the year ended on 31 December consisted of the following: 2019 2018
Contract liabilities arising due to the difference between the income earned by the Enter- prise from air navigation services and the expenses incurred in order to earn the income 2 438 2 900 (non-current share) (Note 13) Contract liabilities arising due to the difference between the income earned by the Enter- prise from air navigation services and the expenses incurred to earn the income (current 2 900 916 share) (Note 13) Total 5 338 3 816
The liability arising due to the implementation of the Commission Implementing Regulation (EU) No. 2019/317 of 11 February 2019 laying down a common charging scheme for air navigation services, according to which the charges for air navigation services should be established so that the income earned would cover the expenses incurred. In cases when the income actually earned by the Enterprise exceeds or is smaller than the expenses incurred in order to earn that income and the traffic risk sharing mechanism is applied, the over-recovery/under-recovery amounts are calculated in accordance with the provisions of the Commission Implementing Regulation (EU) No. 2019/317 and are accounted for as contract liabilities.
The reclassification of the comparative numbers in the statement of the financial position in accordance with the audit recommendations: After reclassification Before reclassification 31 December 2018 31 December 2018 Accounts payable after one year and non-current liabilities Provisions 2 900 Contract liabilities 2 900 Accounts payable within one year and current liabilities Provisions 225 1 141 Contract liabilities 916 Total 4 041 4 041
The reclassification was performed in order to present the contract liabilities separately from the provisions disclosed in Note 22.
11. Trade and other payables
As at 31 December trade and other payables consisted of the following: 2019 2018
Accrued expenses 1 778 2 631 Vacation accrual 1 226 1 219 Social security payables 308 562 Trade debts (excluding accounts payable to related parties) 240 1 371 Accounts payable to related parties (Note 20) 76 126 Other payables 109 5 Total 3 737 5 914 Out of this amount: Attributable to financial liabilities 316 1 497 Non-attributable to financial liabilities 3 421 4 417
Terms and conditions for financial liabilities other than loans received are as follows:
a) interest is not charged on trade debts, they are usually paid within 1–60 days; b) interest is not charged on other payable sums, their average term for payment is 1–60 days.
66 | ANNUAL REPORT 2019 12. Employee benefits
As at 31 December employee benefits consisted of the following: 2019 2018
Employee benefits according to the Collective Bargaining Agreement 1 925 1 605 Retirement benefits 422 730 Jubilee benefits 544 495 Total 2 891 2 830
Less non-current liabilities: Employee benefits according to the Collective Bargaining Agreement - - Retirement benefits (294) (598) Jubilee benefits (474) (417) Total short-term employee benefits 2 123 1 815
As at 31 December 2019 and 31 December 2018 the Enterprise accounted for the liabilities related to termination benefits for the employees leaving the Enterprise at the retirement age, employee benefits according to Collective Bargaining Agreement and jubilee benefits. The expenses related to these liabilities were included into profit (loss). The main assumptions used for estimation of the retirement and jubilee benefits are as follows: 2019 2018
Discount rate 0.3 percent 0.3 percent Annual average employee turnover 4.8 percent 5.8 percent Annual average growth of wages 3 percent 3 percent
13. Sales For the year ended at 31 December sales consisted of the following: 2019 2018
Income from en-route services 23 925 26 266 Income from terminal services 5 294 5 644 Adjustment for over – recovery of income from en-route services provided (Note 10) (1 149) (1 712) Adjustment for over – recovery of income from terminal services (Note 10) (373) (679) Total 27 697 29 519
14. Cost of sales For the year ended at 31 December cost of sales consisted of the following: 2019 2018
Wages and other employee related expenses (including social insurance expenses) 11 060 11 429 Change of the accrued expenses related to employees and employee benefits 1 340 432 Depreciation and amortisation 2 814 2 762 Insurance 670 587 Eurocontrol membership fee - 1 164 Other 2 368 2 239 Total 18 252 18 613
ANNUAL REPORT 2019 | 67 15. General and administrative expenses
For the year ended at 31 December general and administrative expenses consisted of the following: 2019 2018
Wages and other employee related expenses (including social insurance expenses) 3 241 3 127 Depreciation and amortisation 379 165 Change of the accrued expenses related to employees and employee benefits 343 129 Tax on state capital 298 298 Insurance 127 86 Impairment allowance for doubtful trade receivables 108 342 Audit and consulting expenses 84 46 Expenses related to information provision by Lithuanian Hydrometeorological Service - 621 Regulator‘s expenses - 524 Other 983 895 Total 5 563 6 233
16. Other income (expenses)
For the year ended at 31 December other income (expenses) consisted of the following: 2019 2018
OTHER INCOME ES financing income, related to projects implemented by the Enterprise 964 388 Sales of radar information 209 209 Other income 99 152 Total 1 272 749
OTHER EXPENSES Expenses related to projects implemented by the Enterprise (partially financed by the EU): Remuneration and social security contributions (757) (661) Other expenses (216) (273)
Other expenses related to income from other activities: Depreciation (284) (288) Remuneration and social security contributions (23) (32) Total (1 280) (1 300)
Profit (loss) from other activities (8) (551) The Enterprise implements projects of SESAR 2020 (Single European Sky ATM Research) Programme, to improve the functionality of the European Air Traffic Management (ATM) Network by modernizing and harmonizing ATM systems, by developing, testing and deploying innovative technological and operational ATM solutions. The SESAR 2020 Programme is managed by the SESAR Joint Undertaking (SJU) and is co-financed by EU funds under the biggest EU Research and Innovation Programme ever, Horizon 2020: EU covers 70 per cent of direct and indirect eligible costs incurred by the Enterprise in relation to SESAR projects. Funding of indirect costs cannot exceed 25 per cent of direct eligible costs incurred by the Enterprise less the costs of subcontracting. In 2019 the SESAR project-related EU funding received and recognized as income amounted to 836 thousand euros (2018: 388 thousand euros). The Enterprise also carries out projects on implementation of technological solutions of the SESAR Deployment Programme. These projects are co-financed by the Connecting Europe Facility Programme: 43 per cent of the project-related eligible costs of the Enterprise are reimbursed. By im- plementing these projects the Enterprise contributes to modernization of the European ATM system by developing efficient infrastructure of ATM system: the Enterprise will provide the Data Link Services, and the Data Link Services requirements will be established for the common model D, in order to implement a single data communication network and further develop the Baltic FAB ATM system. In 2019 the financing related to these projects recognised as income comprised 83 thousand euros (2018: no such income).
68 | ANNUAL REPORT 2019 On 9 April 2019 the Enterprise signed a partial financing contract for the project “EGNOS Lietuva” with European GNSS Agency (hereinafter referred to as GSA) which is authorised by the European Commission to manage the independent satellite navigation programmes Galileo and EGNOS. The European Commission entrusted GSA with the implementation of European Geostationary Navigation Overlay Service (hereinafter referred to as EGNOS) usage promotion programme. In accordance with the contract signed the Enterprise was allocated partial financing for the implementation of the project “EGNOS Lietuva”. The project envisages the preparation and installation of access procedures LPV/LPV-200 (hereinafter referred to as LPV) in Vilnius, Kaunas and Palanga Airports. LPV are the approach for landing procedures based on EGNOS which enable the aircraft provided with the special equipment to approach for landing following the instrument readings until a relatively low height (in case of LPV-200 – up to 200 feet (60 meters)). When implementing the project the Enterprise must acquire special procedure design software, EGNOS signal measurement and data analysis equipment, the procedure inspection in real environment services, perform the analysis of the territories surrounding the airports, prepare the maps of obstacles, perform the safety evaluation, inspect the suitability of procedures for usage, train the air traffic controllers and announce the procedures in Aeronautical Information Publication (AIP). The beginning of this project – April 2018, the end of this project – 31 January 2021. Budget of the project – 250.5 thousand euros, 60 percent of this sum is financed from GSA funds, the other part shall be financed by the Enterprise. In 2019 the financing related to this project recognised as income comprised 45 thousand euros (2018: there were no such income).
17. Corporate income tax
In 2019 and 2018 the corporate income tax was calculated applying 15 percent tax rate applicable in the Republic of Lithuania.
Total amount of corporate income tax expenses may be reconciled to the profit before tax: 2019 2018
Profit before tax 4 066 4 138 Corporate income tax, 15 percent 610 621
Impact of non-taxable income (73) (2) Impact of non-deductible expenses on taxable profit 608 92 Impact of deferred tax (124) (902) Corporate income tax expenses (income) 1 021 (191) Effective corporate income tax rate 25,1 proc. -4,6 proc.
For the year ended 31 December the corporate income tax expenses (income) comprised: 2019 2018
Corporate income tax expenses for the year 1 145 1 085 Corrections of the corporate income tax for the previous periods (50) - Deferred tax (124) (1 276) Total corporate income tax expenses (income) 971 (191)
ANNUAL REPORT 2019 | 69 18. The deferred tax
The change in the deferred tax during the period: 2019 2018
At the beginning of the year 1 053 - Recognised in profit (loss) 124 1 276 Recognised in other comprehensive income 82 (223) At the end of the year 1 259 1 053
In 2019 and 2018 the deferred tax assets and liabilities were calculated applying a tax rate of 15 percent.
As at 31 December deferred tax asset and the liability were composed of: 2019 2018
Deferred tax assets Provisions, arising from the difference between the air navigation service income earned by the Enterprise and the expenses incurred for earning this income (Note 10) 801 572 Employee benefit liabilities 434 425 Accrued expenses 268 11 Revaluation of property, plant and equipment 184 188 Impairment allowance of trade debtors 75 80 Other 24 - Deferred tax assets 1 786 1 276 Less: the unrecognised part of deferred tax assets (386) - The recognised part of deferred tax assets 1 400 1 276
The deferred tax liability Revaluation of property, plant and equipment (141) (223) Total deferred tax liability (141) (223)
Net deferred tax assets (liability) 1 259 1 053
Deferred tax assets are recognized only to the extent that it is probable that taxable profit will be available in the future.
19. Financial relations with the management of the Enterprise
2019 2018
Amounts calculated for the management for year related to work relations (including the social insurance contributions of the employee and the employer) 142 180 The average number of executive officers per year 1,4 2
In June – December 2019 the management of the Enterprise was composed of the chief executive officer, while in January – May 2019 and in January – December 2018 it was composed of the chief executive officer and the deputy chief executive officer. The wages of the management consisted of the fixed and variable component. In 2019 the fixed component of the wage of the chief executive officer of the Enterprise was recalculated taking into consideration the adjusted basic wage (salary) of the civil servants related to the tax reform implemented in the Republic of Lithuania from 1 January 2019. Under the decision of the Ministry of Transport and Communications of 25 September 2018 the coefficient for fixed component of the wage of the chief executive officer of the Enterprise was increased by 9 percent. Due to the above- mentioned changes the wage of the deputy chief executive officer was recalculated accordingly. Since in 2019 and 2018 the Enterprise achieved the set goals, the maximum amount of the variable component of the wage was calculated and paid to the management of the Enterprise; it comprised 50 percent of the fixed component of the wage. Furthermore, the annual bonus for the results of the year 2018 was calculated for the management of the Enterprise in 2019 which comprised 20 thousand euros (2018 for the results of the year 2017: 24 thousand euros) (including the employee and employer social security contributions). No guarantees were granted or assets transferred to the management of the Enterprise in 2019 and 2018. In 2019 the reimbursement to the board members of the Enterprise comprised 90 thousand euros (2018: 55 thousand euros).
70 | ANNUAL REPORT 2019 20. Related party transactions During the year ended at 31 December 2019 and 31 December 2018 the Enterprise performed transactions including sales and purchases with the related parties (i.e. other enterprises controlled by the state). The table provided below reflects the transactions with related enterprises during the period ended at 31 December 2019: Accounts receivable Accounts payable Sales Purchases Related party (incl. VAT) (incl. VAT) (excl. VAT) (excl. VAT)
PI Transport Competence Agency (until 1 January 2019 – GE - 10 619 34 Civil Aviation Administration) Air Base of the Lithuanian Air Force of Lithuanian Armed - 1 389 2 Forces Airspace Surveillance and Control Command of the Air Force 2 - 209 - of Lithuanian Armed Forces SE Lithuanian Airports - 46 103 461 GE Lithuanian Transport Safety Administration (until 1 January - - 41 - 2019 – GE Civil Aviation Administration) Lithuanian Hydrometeorological CRCO - 7 35 7 AB Lietuvos radijo ir televizijos centras 1 - 3 - ME Šiauliai Airport - - 2 - Vilnius Gediminas Technical University - - 1 1 Aviation Board of State Border Guard Service at the Ministry - - 1 - of the Interior of Republic of Lithuania PI Vilnius City Clinical Hospital - - - 6 SE Centre of Registers - - - 4 PI Energetikų mokymo centras - - - 3 Vilnius City Municipality Administration - - - 3 Information Technology Service at the Ministry of National - - - 1 Defence (MND) SE Lietuvos paštas - - - 1 Total 3 64 1 403 523
In 2019 the Enterprise transferred over the property, plant and equipment (i.e. buildings and structures) to state enterprise Lithuanian Airports and Lithuanian Transport Safety Administration; the carrying value of assets transferred comprised 3 261 thousand euros and 312 thousand euros respec- tively. The owner’s capital and revaluation reserve were reduced by the amounts mentioned accordingly (Note 7). The table provided below reflects the transactions with related enterprises during the period ended at 31 December 2018: Accounts receivable Accounts payable Sales Purchases Related party (incl. VAT) (incl. VAT) (excl. VAT) (excl. VAT)
Air Base of the Lithuanian Air Force of Lithuanian Armed Forces - - 402 2 Airspace Surveillance and Control Command of the Air Force of 2 - 209 - Lithuanian Armed Forces Lithuanian Hydrometeorological CRCO - 63 34 621 GE Civil Aviation Administration 3 - 44 524 SE Lithuanian Airports - 62 94 495 PI Vilnius City Clinical Hospital - - - 5 SE Centre of Registers - - - 4 Vilnius Gediminas Technical University - 1 2 3 Vilnius City Municipality Administration - - - 2 SE Lietuvos pastas - - - 1 PI Energetikų mokymo centras - - - 1 ME Šiauliai Airport - - 2 - Aviation Board of State Border Guard Service at the Ministry of - - 1 - the Interior of Republic of Lithuania Total 5 126 788 1 658
In 2019 and 2018 there was no impairment allowance recognized for doubtful accounts receivable from the related parties. ANNUAL REPORT 2019 | 71 21. Leases
The Enterprise has two security system equipment lease contracts concluded that expire onl 1 September 2021. The right to use the asset arising from the contracts mentioned was accounted for following the requirements established under the IFRS 16. 2019
Carrying value of the right to use the asset on 1 January - Recognition 455 Depreciation (76) Carrying value of the right to use the asset on 31 December 379
The Enterprise has low value computer hardware lease contract concluded in accordance with which the computer hardware is leased for a period not longer than 3 years. The Enterprise decided not to recognise the right to use the assets as well as short-term lease liability for leases of low-value assets. Such lease payments are recognised as expenses in profit (loss) on straight line basis during the period of the lease. The expenses for the low value computer hardware during the year 2019 comprised 70 thousand euros.
22. Provisions, contingent liabilities and contingent assets related to legal disputes As at 31 December 2019 the Enterprise took part in cases related to former employees of the Enterprise as the defendent: - civil case (the Enterprise is the defendent) - the former employee of the Enterprise submitted a claim regarding his suspension and dismissal from work by which it was requested to recognise that the suspension and dismissal from work was illegal, return the employee to work and to provide the average salary for the period of suspension from 25 October 2016 to 2 November 2016 and the average salary for the period from 3 November 2016 (i.e. the day of dismissal from work) until the day when the court decision is executed, to cover the non-pecuniary loss of 2 000 euros as well as the related legal costs incurred. This case was suspended under the court decision of 3 January 2017 until 14 July 2019 when the final decision was taken at the administrative case by the court which is described below. Under the court decision of 8 January 2020 the claim of the former employee of the Enterprise was partially met and the amount of 161 thousand euros was awarded to the former employee from the Enterprise. Both the Enterprise and the former employee of the Enterprise (claimant) appealed against the decision of the court of the first instance following the procedure of appeal. The case shall be heard at the court of appeal. Under the opinion of the management of the Enterprise the final amount awarded by the court to the former employee from the Enterprise should not differ significantly if to compare to the the amount awarded under the court decision on 8 January 2020. Consequently on 31 December 2019 the Enterprise accounted for a provision of 163 thousand euros (31 December 2018: 110 thousand euros) for reimbursing the liabilities related to this case (Note 10); - administrative case (the Enterprise is the defendent) – a former employee of the Enterprise who also initiated the civil case described above addressed Vilnius Regional Administrative Court requesting to recognise the order of the Enterprise under which his permission to work or get acquainted with the information of confidential nature was revoked to have been illegal. On 14 July 2019 the court passed a decision which was unfavourable to the Enterprise, under which the above-mentioned order of the Enterprise was revoked, and the Enterprise was obliged to reimburse the former employee 5 thousand euros costs related to this case; - civil case (the Enterprise is the defendent) – the claim of the former employee of the Enterprise of 30 August 2018 regarding the illegal dismissal from work under which it was requested to recognise the right of the employee to rent and to award him the rent as the subject of unreceived income, also to award the average salary from 1 August 2018 (day of dismissal) until the day of execution of the court decision, also to cover non-pecuniary loss of 10 thousand euros and the related legal costs incurred. Under the decision of the court of 19 March 2019 the claim of the former employee of the Enterprise was met partially and the former employee of the Enterprise was awarded to be paid by the Enterprise a sum of 65 thousand euros (on 31 December 2018 the amount of the provision related to this case comprised 114 thousand euros (Note 10)). The claimant appealed against this court decision. Under the court decision of 25 February 2020 the claimant was additionally awarded the amount of 13 thousand euros from the Enterprise. In 2019 a civil case, in which the Enterprise took part as the claimant: – on 15 January 2019 the Enterprise addressed the court with a claim regarding awarding a fine for delay of 810 thousand euros from construction contractors of the new administrative building of the Enterprise - UAB “Eikos statyba” and UAB “Irdaiva” due to the delay in completing the construction works of the new administrative building. On 24 October 2019 the case was concluded by a court settlement in accordance with which UAB “Eikos statyba” paid the Enterprise a fine for delay of 175 thousand euros. The Enterprise did not take part in any other court proceedings that according to the management would have a significant effect on financial reporting or that would contain information that would have to be additionally disclosed.
23. Events after the reporting period
After the end of the financial year, until the approval of these financial statements, there have been no events that would have a material effect on the financial statements or should be additionally disclosed, except for the events after the reporting period related to legal disputes described in Note 22.
72 | ANNUAL REPORT 2019 ANNUAL REPORT 2019 | 73 STATE ENTERPRISE ORO NAVIGACIJA ANNUAL REPORT 2019
74 | ANNUAL REPORT 2019